Sunday 16 June 2019 2:23 pm

Serco tried to merge with struggling Babcock

Outsourcing giant Serco has tried twice to merge with its considerably bigger rival Babcock as they both grapple with a tough industry.

Serco’s chair, Sir Roy Gardner, reportedly contacted Mike Turner, who heads Babcock’s board, at the end of 2018.

Turner rejected the proposal, the Sunday Times reported.

However, this did not stop Serco from coming back with a more detailed proposal to merge the two London-listed firms in January.

Its all-share deal would have created a £4bn giant chaired by Gardner.

Serco is a part-owner in the UK’s nuclear bomb factory in Aldermaston, while Babcock is one of the largest suppliers to the Ministry of Defence. It has contracts in the billions with the MoD.

Earlier this month Babcock outlined plans to increase it profit growth by three to four per cent in the next half a decade.

Its shares have taken a massive beating in the last year, not least after dealing with a mysterious anonymous analysts’ note.

Shares, which were at 847p in June last year, closed at 465p on Friday.

Babcock hopes to grow in part through foreign expansion, increasing overseas revenue from 30 to 40 per cent of the total.

It came after the company cut its outlook in May, showing that operating profits slumped by nearly half.

Analysts called for change at the top of the company after the news.

“With profits up every year since 2015 and the share price more than halving, something has to give,” said RBC Capital Markets analyst Andrew Gibb.

Serco and Babcock declined to comment.