Following a three-week siege and two rejected approaches, Babcock succeeded in persuading VT boss Paul Lester to open his books so synergies between the two companies could be worked out. Earlier in the morning VT said it would pull out of its £330m pursuit of minnow Mouchel, clearing the way for discussions.
Sources close to Babcock insisted the most recent offer range of 685p to 715p per VT share – £1.25bn at the midpoint – still stood.
But as the two sides locked antlers, four fund managers with stakes in both firms told City A.M. they were worried Babcock would overpay.
Tim Steer of Artemis said: “I would rather they pay less than 750p. It’s the right deal but there’s got to be a balance and I don’t want them to pay too much.”
A second fund manager suggested Babcock would be tempted to up the cash component of its offer from 245.5p. “I think the synergies have been understated by Babcock but I would be concerned if they started overpaying,” he added. Two more investors made similar comments.
On the VT side, Angela Lascelles of Olim – which owns 1.5 per cent – said 750p would be the lowest acceptable level for a deal. She said: “I told Cazenove on behalf of Babcock I would not meet them until they put a sensible bid on the table.”