VT requests deadline to get Babcock to put up or shut up

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The Independent Online

VT group is asking the Takeover Panel to impose a "put up or shut up" deadline on Babcock International following two rejected takeover approaches from the company this week.

VT was already immersed in its own campaign to take over Mouchel, the engineering consultants, when rival Babcock made its first move on Monday. The VT management rejected the proposal as "strategically unsound" and "at a level which substantially undervalues the company and its prospects".

Babcock then raised its approach to between 680p and 715p – valuing the company at £1.25bn – subject to synergy savings to be established by due diligence on VT's books. VT categorically rejected the advance once again, and is now requesting the Takeover Panel impose a deadline to force Babcock to either make a formal bid or walk away. The panel's response is expected on Monday.

Babcock's initial offer proposed 245.5p in cash and 0.701 Babcock shares for every new share, valuing the company at about £1.14bn.

VT, formerly the shipbuilder Vosper Thornycroft, sold its shipbuilding business to BAE Systems last year. Armed with the £380m cash pile from the sale, the group is on the prowl for acquisitions to help build up its services and outsourcing business.

Paul Lester, the chief executive, says that the company's strength is its decreased exposure to the Ministry of Defence (MoD) and potential budget cuts. Instead the company has reinvented itself as a services business, and has major contracts maintaining Metropolitan Police vehicles and the BBC's broadcast infrastructure for example. The argument against the industrial logic of the Babcock deal is that it would increase its exposure to the MoD again.

"The transaction would be a retrograde strategic step for VT , which has successfully reduced its exposure to the Ministry of Defence, which could be susceptible to budget cutbacks following the general election," the company said when it rejected the first Babcock approach.

The company's bid for Mouchel is in line with the plan to focus on services. After an initial offer, put forward in December, was rejected, VT Group raised it by 18 per cent this week, valuing the target company at around £320m.

But Babcock has been after VT Group for some time. It emerged this week that Babcock has already approached the company twice in the last 12 months.

At least one major Babcock shareholder is publicly critical of the VT deal. A fund manager with Schroders, which owns nearly 10 per cent of the group's stock, described the increased offer as "a crazy price".