VT Group is understood to have offered to return £230m to shareholders in an attempt to ward off Babcock International's £1.25bn bid for the Ftse 250 support services company.
Industry sources said that VT's chief executive, Paul Lester, has taken his defence to big shareholders last week, arguing that the offer substantially undervalued the group.
VT has a net cash balance of around £230m, which sources close to shareholders said could be distributed in a special dividend. It is understood that the board would not enter talks at less than 750p-a-share and probably won't recommend a deal unless it comes close to 800p. The Babcock stock-plus-shares offer is worth 685-to-715p.
Mr Lester declined to comment on the cash proposal, but said: "My job is to get the right deal for the shareholders and do the right thing by our employees. This is a good business. The current price isn't enough and we have other options."
VT had been engaged in its own predatory move, attempting to buy smaller rival Mouchel for £330m. Even if the cash, which was raised when VT sold its shipbuilding operations last year, was given to investors, the group has few debts and so could easily raise a loan for the acquisition.
The shipbuilding exit was part of a plan to reposition VT – formerly Vosper Thorneycroft – to take advantage of a probable increase in government outsourcing work. For example, VT has expressed an interest in purchasing the Met Office and is working on the £45bn secondary school rebuilding programme.
Babcock's bid suffered a blow earlier this week when big shareholders questioned the size of the bid. Andy Brough, a fund manager at Schroders, described the price as "crazy". Yet sources close to VT are braced for the offer to be improved at least once more.Reuse content