Serco in acquisitions swoop

The engineering support services group Serco surprised the market yesterday by announcing the simultaneous purchase of two IT companies: the Birmingham-based ITNet and the American RCI Holding Corp.

The engineering support services group Serco surprised the market yesterday by announcing the simultaneous purchase of two IT companies: the Birmingham-based ITNet and the American RCI Holding Corp.

The total value of the deals is approximately £346m, with ITNet's board accepting an offer of 320p per share, or £235m. Its chief executive Bridget Blow will realise more than £6.4m from the sale but will stay on as technology director of Serco.

ITNet had confirmed on 15 November that it was in talks that could lead to an offer. Serco was not considered the most likely suitor by analysts, many of whom had also not expected ITNet to sell for more than 300p per share. Serco was unable to confirm whether the takeover would result in any redundancies at ITNet.

The Virginia-based RCI is being bought for $215m (£111m) in cash. Last year, the company had turnover of $270m, with 85 per cent of that from military sources. RCI is involved in recruitment and training for the US navy and army.

Michael Morris, an analyst at Arbuthnot Securities, said: "I like the new access to the American central government market but they have certainly paid a full price for ITNet."

Some observers expressed concern that Serco may be biting off more than it can chew.

Shares in Serco closed down 7.5p at 227.75p.