ENGINEERING firm VT Group will begin urgent talks with its major shareholders today following a £1.1bn unsolicited approach from Babcock, the shipbuilder.
Chief executive Paul Lester will warn investors such as Invesco Perpetual and Newton against the “derisory” offer, which was immediately dismissed by VT’s board. Lester will argue that a tie-up with Babcock would expose the company to the risk of cutbacks in government naval spending just months after VT sold off its maritime business.
At the same time, Babcock’s advisers are trying to whip up support from the same set of shareholders.
The development is all the more dramatic as it comes in the middle of VT’s pursuit of Mouchel, the smaller services company, which is mulling over a £330m cash and shares offer from VT.
Last night Lester told City A.M. Babcock’s 634p per share offer “totally undervalues” VT. He said: “Strategically, it’s not a good place to take our shareholders. We’ll be discussing with them what we think is the right thing to do.”
Babcock’s approach amounts to a 25 per cent premium to VT’s closing price on Friday, but it includes a hefty chunk of cash from VT’s balance sheet. Lester said the premium was only five per cent once this was taken into account.
Analysts said 700p per share would be the starting point for a viable offer.
A source close to the deal said Babcock enjoyed the backing of several shareholders. The source added: “This is the sort of deal the market’s crying out for. What’s frustrating is VT is unwilling to talk at any level.”
A HANDFUL of investment banks have been brought in to advise VT Group and Babcock as the war of words between the companies intensifies.
On the defence team are Rothschild and Merrill Lynch. On the bidding side are JPMorgan Cazenove, led by Andrew Truscott and Malcolm Moir, and Evercore Partners, led by Bernard Taylor and Julian Oakley.
Taylor is an experienced M&A banker who was chief executive of Braveheart until it was bought out by Evercore in 2006. In his current role as vice chairman of Evercore, he runs the firm’s European operation.
Deals to his name include guiding Wellcome Trust through its acquisition by drugs giant
GlaxoSmithKline and advising Dresdner Bank on its offer for Kleinwort Benson. Taylor also worked with Northern Telecom on its joint venture with Daimler Benz and its link-up with French media conglomerate Lagardère Groupe.
Taylor was educated at Cheltenham College and St John’s College, Oxford. He still has strong ties to the university, chairing its audit and scrutiny committee and chairing ISIS Innovation, the Oxford-owned company that helps research students spin out start-ups and commercialise their intellectual property. He is also a fellow of the Royal Society of Chemistry.