BAE rules out counter bid for tank maker

BAE Systems has ruled out a counter bid for Alvis, the British tank maker, which agreed to sell itself to America's General Dynamics for £309m last week.

BAE Systems has ruled out a counter bid for Alvis, the British tank maker, which agreed to sell itself to America's General Dynamics for £309m last week.

Thursday's 280p-a-share cash offer for Alvis surprised BAE, which already owns 29 per cent of the maker of the Challenger II tank. Last week it refused to say whether it would start a bidding battle. But sources close to BAE said that a bid was unlikely, as it would anger its already grumpy shareholders.

The news will hit Alvis's share price, which closed at 297p on Friday in anticipation of a possible bid from BAE.

General Dynamics said it would complete the deal to buy Alvis with support of just 50.1 per cent of shareholders, rather than the usual 90 per cent. This reduces BAE's chances of using its stake to block the deal.

BAE must now decide whether holding on to its 29 per cent stake will give it any influence over Alvis's future strategy. However, a General Dynamics spokesman said: "There won't be any partnership. BAE will be a minority shareholder in the business like anyone else."

BAE bought the Alvis stake from defence company GKN just seven months ago. If it sold to General Dynamics then it would make a £16m profit.

Alvis's shareholders have indicated that they are prepared to accept General Dynamics' offer. One top-five investor said: "We are happy with 280p."

The deal will require approval from the European Commission. However, the Ministry of Defence can force the commission to hand over sensitive aspects of the case to be considered by British regulators. This is to prevent confidential defence information leaking to other European countries.

Alvis is in pole position to win a large slice of the £3bn project to equip the Army with a new armoured vehicle programme.