VT Group has today rejected the revised takeover bid proposal put forward by Babcock International Group on Tuesday, worth almost £1.3bn.
The board of VT Group voted unanimously to reject the revised proposal, which was between 680p and 715p per VT share.
The company said the proposal was “only a small improvement on Babcock’s previous indicative offer, continued to significantly undervalue VT and its prospects and still relied on returning the net cash proceeds from the exit of BVT, of which VT shareholders already have the benefit”.
“The company will produce higher growth and better returns for shareholders as an independent business pursuing its growth strategy.”
Board of VT Group
VT’s board said: “The company will produce higher growth and better returns for shareholders as an independent business pursuing its support services growth strategy. Further, the acquisition of Mouchel is fully aligned to this strategy and will offer additional opportunities for enhanced returns.”
The board also maintained that Babcock’s rationale for a combination of the two businesses is “strategically unsound”. Babcock is already significantly leveraged and remains exposed to pension liabilities of over £2bn, said VT.
VT, which has recently worked to reduce its exposure to MoD, said the enlarged group would be vulnerable to potential Ministry of Defence (MoD) budget cutbacks following the election.
Conflict of interest
Babcock’s position as a contractor to MoD in the marine and Defence Estates areas is likely to create a conflict of interest, VT said, that would prevent the enlarged group from participating in the potential outsourcing of MoD’s procurement activities.
VT also said the benefits of the potential cost synergies postulated by Babcock are unlikely to be fully retained by the enlarged group as it may be a contractual requirement that MoD would share in the cost savings.
Babcock’s first approach to VT came as VT tabled its third takeover bid for Mouchel.