Vickers buys Olso marine firm for pounds 380m

VICKERS, the defence and engineering group, yesterday announced the pounds 380m takeover of a Norwegian marine engineering business, its first major deal since selling off the luxury car maker Rolls-Royce to Volkswagen.

The acquisition of the Oslo-based group Ulstein will turn Vickers into one of the world's leading manufacturers of marine propulsion systems and signifies a further shift in emphasis away from its traditional tank business.

Vickers is paying pounds 304m in cash for all of Ulstein's businesses apart from its shipbuilding division. It is also assuming pounds 42m in debt and will incur further transaction and restructuring costs of around pounds 30m. There will also be a goodwill write-off of more than pounds 200m.

The purchase price represents a premium of more than 200 per cent to Ulstein's price before takeover talks were disclosed last week, prompting concern among analysts that Vickers has overpaid.

Vickers, which raised pounds 470m from the Rolls sale, will also have net debt following the takeover, although it said the deal would be earnings enhancing and, at worst, interest cover would be covered at least five times by earnings.

Baron Buysse, Vickers' chief executive, defended the price being paid for Ulstein by saying the combined business would be a world leader. The takeover could result in some rationalisation of capacity in Edinburgh, where Ulstein and Vickers' own marine propulsion business, Kamewa, both have facilities.

The combined business will have sales of pounds 500m and more than 2,300 employees. Mr Buysse said he did not foresee any difficulties with European competition authorities over market dominance.

The move by Vickers to deepen its involvement in marine engineering prompted speculation that it may dispose of its Challenger 2 tank business, either by selling it to a US buyer like United Defense or merging it with the new GKN-Alvis joint venture in fighting vehicles.