ENGINEER Babcock International is expected to seal a takeover of rival VT Group this week after a prolonged tussle between the companies and their respective advisers.
Price is understood to be the final hurdle for Babcock, which was granted access to VT’s financial information at the start of March. Friendly talks between the defence services firms have reached a closing stage and VT is tipped to recommend an offer from Babcock within days.
Babcock, led by chief executive Peter Rogers, is thought to have identified cost savings of as much as £50m through a merger of the businesses – double the amount it estimated before VT opened its doors.
The findings will put pressure on Babcock to ratchet up its offer from the £1.25bn currently on the table.
The price range of 685p to 715p per share offered by Rogers was batted away by VT boss Paul Lester before the pair sat down for discussions, with VT management demanding 750p per share throughout the process. Fund manager Tim Steer of Artemis, a shareholder in both companies, has said 735p may be more realistic.
A successful deal is likely to yield millions of pounds in extra fees for JPMorgan Cazenove, which is advising Babcock. A raised offer is also likely to mean a large bonus for Rothschild, which has carried out VT’s defence work.
Movements in the two groups’ share prices since Babcock’s first offer in February mean VT is now the larger company, with a market cap of £1.23bn on Friday. Its shares ended the week 0.4 per cent down at 686.5p.