BAE trumps US bid for Alvis with £355m deal

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The Independent Online

The defence giant BAE Systems snatched Alvis, the maker of the British Army's Challenger tanks, from the grasp of its US rival General Dynamics yesterday with a £355m bid.

The defence giant BAE Systems snatched Alvis, the maker of the British Army's Challenger tanks, from the grasp of its US rival General Dynamics yesterday with a £355m bid.

BAE, which has a 28.7 per cent stake in Alvis, has offered 320p a share, trumping General Dynamics' bid and securing a recommendation from the Alvis board. BAE already had the support of another 16.2 per cent of shareholders, mainly hedge funds, and General Dynamics last night said it would not make a counter bid.

The deal means armoured vehicle manufacturing for the Army will stay under UK ownership. General Dynamics, another armoured vehicles specialist, had offered £309m, or 280p a share, in March for Alvis in an attempt to win more European orders. But it only won support from 17 per cent of shareholders, and postponed the date for acceptances three times.

The Government is expected to spend some £3bn on armoured vehicles over the next 10 years, making Alvis an attractive opportunity for BAE. Mike Turner, the chief executive of BAE, said: "We believe the acquisition of Alvis offers substantial opportunities to build on BAE's support services strategy in the land sector, where the very large equipment base presents opportunities for business growth and cost reduction." Alvis, which acquired the Vickers Defence tank business from Rolls-Royce in 2002, has about 2,800 employees. BAE said it did not expect to make job losses as a result of the deal. BAE, which has been in merger talks with a number of US contractors including General Dynamics, bought GKN's 29 per cent stake in Alvis for £73m last August.

Until BAE's bid last night, General Dynamics had got the go-ahead to pursue its acquisition from the Government, which said it would not refer the deal to the Competition Commission.

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