VT's former boss and current investor critical of Babcock bid

Executives of support services group win support of Peter Usher in fight against takeover bid
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The Independent Online

Peter Usher, who took the nationalised Vosper Thorneycroft shipbuilding empire private in the Thatcher era, has hit out at a current £1.25bn takeover bid for the company.

Mr Usher, whose family still owns 600,000 shares in what is now known as VT Group, said that he "can't understand" Babcock International's bid for the company.

VT has been repositioning itself, moving out of shipbuilding last year and reducing its exposure to Ministry of Defence (MoD) contracts. "The last thing that VT wants to do is get into a company that has the MoD as a major customer," argued Mr Usher, who was chief executive and chairman of the company from 1985 to 1995.

The comments are a boost to VT's chief executive, Paul Lester, and the chairman, Mike Jeffries, who have so far resisted Babcock's 685p-to-715p a share overture. Many industry observers think that VT would be forced to open its books if a revised offer of more than 750p was placed.

A source close to VT said that the market currently undervalued the company, which focuses on support services contracts in a range of sectors, including nuclear and education. "The market hasn't fully taken into account VT's exit from shipbuilding, a lumpy, risky area to be involved in," he said.

Babcock is likely to have to woo VT employees, both current and former, as one of its tactics to win control of the Ftse 250 group. It is estimated that they hold around 3 per cent of the company's stock, in effect making them a top 10 shareholder. VT's 8,000 UK employees have been given a bonus of £300 of shares for each of the past five years.

The parties are expecting a ruling from the Takeover Panel next week, which should set a deadline for Babcock to formalise its offer.

Part of VT's defence strategy has been to raise the possibility of returning more than £230m of cash sitting on its balance sheet to shareholders. This would be passed over as a special dividend. But there have been concerns that stripping out the cash could undermine VT's own takeover ambitions. Mr Lester is trying to buy Mouchel, a smaller rival, for £330m.

However, it is understood that the company would be able to secure the loan necessary to purchase the group, as there is so little debt in the company at present. Should Babcock succeed in taking over VT, the Mouchel bid would be dropped.

A Babcock spokesman defended the bid. He said: "We believe strategically in putting these businesses together. The combined group would have increased opportunities to win outsourced MoD work and overnight become the major player in UK nuclear support services."

VT shares closed at 667.5p on Friday, up 6p on the start of trading. Babcock was down 3.5p to 526.5p. Mouchel was 210.75p, up 2.25p.