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Babcock offer threatens VT Group’s Mouchel bid

The Mouchel takeover saga took a new twist this week after it emerged that its suitor, VT Group, had become the target of a takeover bid from defence firm Babcock International.

Babcock made an unofficial approach to VT Group on 3 February, but this was rejected.

Analysts said Babcock was likely to increase its offer and it is understood that some VT shareholders are interested in reviving the bid.

The move has thrown the Mouchel takeover into confusion as Babcock’s bid includes a clause that specifically warns VT Group off any takeover attempt of the consultant.

“Babcock reserves the right to make an offer on less favourable terms than those set out in this announcement in the event that…a third party announces a firm intention to make an offer for VT or VT announces a firm intention to make an offer for Mouchel Group,” it says.

Babcock announced that it had approached VT Group shortly after VT Group upped its bid for Mouchel from 260p per share to 300p.

This is the price that Mouchel shareholders were understood to be willing to accept for the consultant.

“VT Group wants to buy Mouchel, but now it will not be allowed to.”

Geoff Allum, Arden & Partners

NCE understands that two major Mouchel shareholders were ready to accept the 300p deal and according to analysts, a deal was close to being agreed.

VT Group said Babcock’s offer undervalued the company.

“They [Babcock] are strategically challenged because they are reliant on the vagaries of the defence budget, which is exactly why we wanted to get out of that sector and buy Mouchel,” said a spokesman.

Babcock International is a FTSE 250 company and one of the UK’s largest engineering support services organisations with revenue of £1.9bn in 2009.

It delivers asset support to many sectors, including transport, energy, defence, telecommunications and education.

Babcock said that linking with VT would have significant industrial and commercial logic.

“VT buying Mouchel would limit options and not give their shareholders value.”

It said a merger would bring together two highly complementary businesses to create a large and focused international engineering support services company.

Stockbroker Arden & Partners partner Geoff Allum said VT Group’s plans to buy Mouchel were now dead.

“The City doesn’t think it will happen. VT Group wants to buy Mouchel, but now they will not be allowed to. For VT Group to go ahead and buy Mouchel would limit options and not give their shareholders value,” he said.

City analysts said VT Group and Babcock have been considered ideal partners for 20 years.

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