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Babcock Intnl Group (BAB)

  Print      Mail a friend       Annual reports

Tuesday 23 March, 2010

Babcock Intnl Group

Recommended Acquisition of VT

RNS Number : 9995I
Babcock International Group PLC
23 March 2010
 



THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR ANY BABCOCK INTERNATIONAL GROUP PLC SHARES EXCEPT ON THE BASIS OF INFORMATION IN THE PROSPECTUS WHICH IS PROPOSED TO BE PUBLISHED BY BABCOCK INTERNATIONAL GROUP PLC IN DUE COURSE

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

For immediate release

23 March 2010

Babcock International Group PLC

Recommended Acquisition of

VT Group plc

 

Summary

·    The boards of Babcock International Group PLC ("Babcock") and VT Group plc ("VT") are pleased to announce that they have reached agreement on the terms of the recommended acquisition by Babcock of all of the issued and to be issued share capital of VT (the "Acquisition").

·    As set out below, the terms of the Acquisition value each VT Share at 750 pence based on the undisturbed Babcock share price and 734.9 pence based on the latest Babcock Closing Price. On the basis of Babcock's latest Closing Price, the terms of the Acquisition value the existing share capital of VT at approximately £1,326 million.

·     Under the terms of the Acquisition, VT Shareholders will receive:

for each VT Share:

361.6 pence in cash; and


0.701 New Babcock Shares.

 

·     The consideration under the terms of the Acquisition represents a value of:

750 pence per VT Share, based on the undisturbed Closing Price of 554 pence per Babcock Share on 12 February 2010 (being the last Business Day prior to the announcement by Babcock of a possible offer for VT), representing a premium of approximately 42 per cent. to the average Closing Price of 527 pence per VT Share for the one month trading period to 12 February 2010;

734.9 pence per VT Share, based on the latest Closing Price of 532.5 pence per Babcock Share on 22 March 2010 (being the last Business Day prior to the date of this announcement), representing a premium of approximately  39 per cent. to the average Closing Price of 527 pence per VT Share for the one month trading period to 12 February 2010 (being the last Business Day prior to the announcement by Babcock of a possible offer for VT); and

734.9  pence per VT Share, based on the latest Closing Price of 532.5 pence per Babcock Share on 22 March 2010 (being the last Business Day prior to the date of this announcement), representing a premium of approximately 45 per cent. to VT's Closing Price of 508 pence on 12 February 2010 (being the last Business Day prior to the announcement by Babcock of a possible offer for VT).

·     Under the terms of the Acquisition, VT Shareholders will not receive any VT final dividend in respect of the financial year ending 31 March 2010. The Consideration Shares to be issued pursuant to the Acquisition will not carry any entitlement to any final dividend or second interim dividend of Babcock declared, made or paid in respect of the financial year ending 31 March 2010.

·     The Acquisition will include a Mix and Match Facility, so that VT Shareholders will be able to elect to vary the proportions of cash and shares they receive, subject to equal and opposite elections made by other VT Shareholders. The Mix and Match Facility will not change the total number of shares to be issued by Babcock pursuant to the Acquisition.

·     Following completion of the Acquisition, VT Shareholders will own approximately 36 per cent. of the Combined Group and will participate in the future growth prospects of the Combined Group.

·     The Babcock Board believes that the Acquisition will bring together two groups with complementary operating models, customers and core competencies and has a compelling strategic rationale as well as financial logic. 

·     The Acquisition is expected to be earnings enhancing for Babcock in the first full financial year following the Effective Date, including through the realisation of anticipated merger benefits of approximately £50 million per annum (pre-tax) and financial efficiencies of a further £8 million per annum (post-tax).

·     Babcock believes that the Combined Group will:

be better placed to deliver a broader range of solutions to existing customers through an enhanced range of capabilities and expertise;

have increased importance and relevance to key customers, allowing an ability to work in partnership to provide enhanced solutions, identify and address customer needs and leaving the Combined Group better positioned to deliver increased services and efficiencies;

1 These amounts include the previously announced anticipated merger benefits of approximately £27 million per annum (pre-tax), and the further benefit of approximately £6 million per annum expected to come from a reduction in the effective corporation tax rate of the Combined Group, each as previously announced by Babcock on 15 February 2010. Nothing in this announcement should be interpreted to mean that the future earnings per share of Babcock will necessarily match or exceed the historical earnings per share of Babcock or VT.

be better able to satisfy growing customer requirements for large and complex contracts and to increase work share;

build on an excellent reputation and track record of delivery to sell complementary capabilities in overseas markets where the Combined Group has an established presence;

possess increased scale, a stronger customer proposition and enhanced business opportunities across the Defence, Nuclear, Critical Infrastructure and International operations, in particular:

§ a broad and deep capability in relation to the UK Air, Land and Sea defence markets across four main support areas: infrastructure, equipment support, training and communications;

§ a strong nuclear business with significant consultancy positions along with presence at tiers one, two and three and with approximately 3,000 employees servicing defence and civil nuclear sectors; and

§ a broader offering in Critical Infrastructure with an opportunity to develop and deliver training and education solutions to civil customers, as well as an enhanced communications offering;

be a highly cash generative business and have a strong balance sheet with access to a deeper pool of capital markets;

have combined pro forma revenues of approximately £3 billion; and

have excellent visibility and security of revenue as a result of a combined order book of approximately £10 billion supported by long-term contracts.

·     The VT Directors, who have been so advised by Rothschild, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the VT Directors, Rothschild has taken into account the VT Directors' commercial assessment of the Acquisition. The VT Directors intend to recommend unanimously that VT Shareholders vote in favour of the resolutions to be proposed at the VT General Meeting and the Scheme Meeting, as the VT Directors have irrevocably undertaken to do in respect of their own beneficial holdings of 436,148 VT Shares in aggregate, representing approximately 0.2 per cent. of the issued ordinary share capital of VT.

·     The Babcock Directors, who have received financial advice from J.P. Morgan Cazenove and Evercore Partners, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the Babcock Directors, J.P. Morgan Cazenove and Evercore Partners have relied upon the Babcock Directors' commercial assessment of the Acquisition. The Babcock Directors intend to recommend unanimously that Babcock Shareholders vote in favour of the resolutions to approve and implement the Acquisition, as the Babcock Directors intend to do in respect of their own beneficial holdings of 1,040,171 Babcock Shares in aggregate, representing approximately 0.5 per cent. of the issued ordinary share capital of Babcock.

·     It is intended that the Acquisition will be effected by way of a Court-sanctioned scheme of arrangement under Part 26 of the 2006 Act. It is expected that a Scheme Document, Prospectus and Babcock Circular will be published as soon as practicable and that, subject to the satisfaction, or where relevant waiver, of all relevant conditions, the Scheme is expected to become Effective, and the Acquisition completed, by the end of July 2010.

Commenting on the Acquisition, Mike Turner, Chairman of Babcock said:

"We are delighted to have reached agreement with the board of VT to recommend our compelling offer for the company. The acquisition of such a high quality and complementary business is in line with our strategy to be the leading engineering support services company in the UK. We look forward to bringing the enhanced capabilities of the enlarged Babcock to new and existing customers".

Commenting on the Acquisition, Mike Jeffries, Chairman of VT said:

"The VT Board believes that Babcock's offer represents an attractive proposition for VT Shareholders both through the immediate offer premium and through the opportunity to benefit from the synergies available from combining our two businesses".

Babcock is hosting an analyst presentation today at 9.00 a.m. at 20 Moorgate, London EC2R 6DA. The analyst presentation will be available on Babcock's corporate website at www.babcock.co.uk.

This summary should be read in conjunction with the main body of the following announcement and Appendices.

 

 

Babcock International Group PLC

Peter Rogers, Chief Executive

Tel: +44 (0)20 7355 5300

Bill Tame, Group Finance Director


Franco Martinelli, Group Financial Controller


J.P. Morgan Cazenove (joint financial adviser and corporate broker to Babcock)

Andrew Truscott

Tel: +44 (0)20 7588 2828

Malcolm Moir


Guy Marks


Christopher Dickinson


Evercore Partners (joint financial adviser to Babcock)

Bernard Taylor

Tel: +44 (0)20 7268 2700

Julian Oakley


Financial Dynamics (PR adviser to Babcock)

Andrew Lorenz

Tel: +44 (0)20 7269 7291

Richard Mountain


VT Group plc


Paul Lester

Tel: +44 (0)23 8083 9001

Philip Harrison


Rothschild (financial adviser to VT)

Robert Leitão

Tel: +44 (0)20 7280 5000

Ravi Gupta

 

Merrill Lynch (corporate broker to VT)

Mark Astaire

Tel: +44 (0)20 7628 1000

Peter Brown

 

Citigate Dewe Rogerson (PR adviser to VT)

Ginny Pulbrook

Tel: +44 (0)20 7638 9571

Patrick Donovan



The conditions to, and certain further terms of, the Acquisition are set out in Appendix 1. The bases and sources of certain financial information contained in the following announcement, and certain additional financial and operational information, are set out in Appendix 2. Details of the irrevocable undertakings received by Babcock in relation to the Acquisition are set out in Appendix 3. Certain definitions and terms used in the following announcement are set out in Appendix 4.

J.P. Morgan plc, which conducts its UK investment banking businesses as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the FSA, is acting as financial adviser to Babcock and no-one else in connection with the contents of this announcement and will not be responsible to any person other than Babcock for providing the protections afforded to customers of J.P. Morgan plc nor for providing advice in relation to any matter referred to herein.

Evercore Partners Limited is authorised and regulated in the United Kingdom by the FSA, is acting as financial adviser to Babcock and for no-one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Babcock for providing the protections afforded to clients of Evercore Partners Limited nor for providing advice in relation to any matter referred to herein.

Rothschild and Merrill Lynch are authorised and regulated in the United Kingdom by the FSA, are acting for VT and for no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than VT for providing the protections afforded to clients of Rothschild and Merrill Lynch nor for providing advice in relation to any matter referred to herein.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purposes of complying with English law and the Takeover Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of England.

This announcement is not intended to, and does not constitute, or form part of, an offer to sell or an invitation to purchase or subscribe for any securities or a solicitation of any vote or approval in any jurisdiction. This announcement does not constitute a prospectus or a prospectus equivalent document. Shareholders of Babcock and VT are advised to read carefully the formal documentation in relation to the Acquisition once it has been despatched. The proposals of the Acquisition will be made solely through the Scheme Document, which will contain the full terms and conditions of the Scheme, including details of how to vote with respect to the Scheme. Any response to the proposals should be made only on the basis of the information in the Scheme Document.

Overseas jurisdictions

This announcement is not an offer of, or solicitation of an offer to purchase, securities in the United States and the New Babcock Shares, which will be issued in connection with the Acquisition, have not been, and will not be, registered under the US Securities Act or under the securities law of any state, district or other jurisdiction of the United States, Australia, Canada or Japan and no regulatory clearance in respect of the New Babcock Shares has been, or will be, applied for in any jurisdiction other than the UK.

The New Babcock Shares may not be offered, sold, or, delivered, directly or indirectly, in, into or from the United States absent registration under the US Securities Act or an exemption from registration. It is expected that the New Babcock Shares to be issued in the Scheme will be issued in reliance upon the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) thereof. Under applicable US securities laws, persons (whether or not US persons) who are or will be "affiliates" (within the meaning of the US Securities Act) of Babcock or VT prior to, or of Babcock after, the Effective Date will be subject to certain transfer restrictions relating to the New Babcock Shares received in connection with the Scheme.

If the Acquisition is implemented by way of an Offer, it will be made in accordance with the procedural and filing requirements of US securities laws, to the extent applicable.

The Acquisition relates to the shares of a UK company and is proposed to be made by means of a scheme of arrangement provided for under the laws of England and Wales. The Acquisition is subject to the disclosure requirements and practices applicable in the United Kingdom to schemes of arrangement, which may differ from the disclosure and other requirements of the securities laws of jurisdictions other than the United Kingdom. Financial information included in the relevant documentation will have been prepared in accordance with accounting standards applicable in the United Kingdom that may not be comparable to the financial statements of non-U.K. companies.

The New Babcock Shares may not be offered, sold, resold, delivered or distributed, directly or indirectly, in, into or from Canada, Australia or Japan or to, or for the account or benefit of, any resident of Australia, Canada or Japan absent an exemption from registration or an exemption under relevant securities law. Copies of this announcement and any formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from Canada, Australia or Japan and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in, into or from Canada, Australia or Japan.

Forward-looking statements

Certain statements in this announcement are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement. Except as required by law, neither of Babcock or VT is under an obligation to update or keep current the forward-looking statements contained in this announcement or to correct any inaccuracies which may become apparent in such forward-looking statements.

No statement in this announcement is intended as a profit forecast or profit estimate and no statement in this announcement should be interpreted to mean that the future earnings per share of the Combined Group, Babcock and/or VT for current or future financial years will necessarily match or exceed the historical or published earnings per share of Babcock or VT.

Dealing Disclosure Requirements

Under the provisions of Rule 8.3 of the Code, if any person is, or becomes, 'interested' (directly or indirectly) in 1 per cent. or more of any class of 'relevant securities' of Babcock or of VT, all 'dealings' in any 'relevant securities' of Babcock or of VT (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by not later than 3.30 p.m. (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which any offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of Babcock or VT, they will be deemed to be a single person for the purpose of Rule 8.3.

Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of Babcock or of VT by Babcock or VT or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.

A disclosure table, giving details of companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.

'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.

 Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8, you should consult the Panel.

 Publication on Babcock website

A copy of this announcement will be available on Babcock's website at (www.babcock.co.uk) by no later than 12 noon (London time) on 24March 2010.


THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR ANY BABCOCK INTERNATIONAL GROUP PLC SHARES EXCEPT ON THE BASIS OF INFORMATION IN THE PROSPECTUS WHICH IS PROPOSED TO BE PUBLISHED BY BABCOCK INTERNATIONAL GROUP PLC IN DUE COURSE

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

For immediate release

23 March 2010

Babcock International Group PLC

Recommended Acquisition of

VT Group plc

1.           Introduction

The boards of Babcock and VT are pleased to announce that they have reached agreement on the terms of the recommended Acquisition by Babcock of all of the issued and to be issued share capital of VT.

It is intended that the Acquisition will be effected by way of a Court-sanctioned scheme of arrangement under Part 26 of the 2006 Act.

2.           The Acquisition

The Acquisition will be on the terms and subject to the Conditions set out below and in Appendix 1, and the full terms and conditions to be set out in the Scheme Document.

·     As set out below, the terms of the Acquisition value each VT Share at 750 pence based on the undisturbed Babcock share price and 734.9 pence based on the latest Babcock Closing Price. On the basis of Babcock's latest Closing Price, the terms of the Acquisition value the existing share capital of VT at approximately £1,326 million.

·     Under the terms of the Acquisition, VT Shareholders will receive:

for each VT Share:

361.6 pence in cash; and


0.701 New Babcock Shares.

 

·     The consideration under the terms of the Acquisition represents a value of:

750 pence per VT Share, based on the undisturbed Closing Price of 554 pence per Babcock Share on 12 February 2010 (being the last Business Day prior to the announcement by Babcock of a possible offer for VT), representing a premium of approximately 42 per cent. to the average Closing Price of 527 pence per VT Share for the one month trading period to 12 February 2010;

734.9 pence per VT Share, based on the latest Closing Price of 532.5 pence per Babcock Share on 22 March 2010 (being the last Business Day prior to the date of this announcement), representing a premium of approximately  39 per cent. to the average Closing Price of 527 pence per VT Share for the one month trading period to 12 February 2010 (being the last Business Day prior to the announcement by Babcock of a possible offer for VT); and

734.9  pence per VT Share, based on the latest Closing Price of 532.5 pence per Babcock Share on 22 March 2010 (being the last Business Day prior to the date of this announcement), representing a premium of approximately 45 per cent. to VT's Closing Price of 508 pence on 12 February 2010 (being the last Business Day prior to the announcement by Babcock of a possible offer for VT).

Under the terms of the Acquisition, VT Shareholders will not receive any VT final dividend in respect of the financial year ending 31 March 2010. The Consideration Shares to be issued pursuant to the Acquisition will not carry any entitlement to any final dividend or second interim dividend of Babcock declared, made or paid in respect of the financial year ending 31 March 2010.

If the Scheme becomes Effective, it will result in the issue of approximately 126.5 million Consideration Shares to VT Shareholders (based on the current number of VT Shares in issue, but excluding shares to be issued under the VT Share Schemes), which would result in VT Shareholders holding approximately 36 per cent. of the Combined Group.

Appropriate proposals will be made in due course to participants in the VT Share Schemes.  Details of the proposals will be set out in the Scheme Document and in separate letters to be sent to participants in the VT Share Schemes.

3.           Mix and Match Facility

Under the terms of the Acquisition, VT Shareholders may elect to vary the proportions of New Babcock Shares and cash consideration they receive in respect of their holdings of VT Shares, via a Mix and Match Facility, subject to equal and opposite elections made by other VT Shareholders. To the extent that elections cannot be satisfied in full, they will be scaled down on a pro rata basis. As a result, VT Shareholders who make an election under the Mix and Match Facility will not know the exact number of New Babcock Shares or amount of cash they will receive until settlement of the consideration under the Acquisition. Elections under the Mix and Match Facility will not affect the entitlements of those VT Shareholders who do not make any such elections or result in Babcock issuing additional Consideration Shares.

Further information on the Mix and Match Facility will be included in the Scheme Document.

4.           Recommendations

The VT Directors, who have been so advised by Rothschild, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the VT Directors, Rothschild has taken into account the VT Directors' commercial assessment of the Acquisition. The VT Directors intend to recommend unanimously that VT Shareholders vote in favour of the resolutions to be proposed at the VT General Meeting and the Scheme Meeting, as the VT Directors have irrevocably undertaken to do in respect of their own beneficial holdings of 436,148 VT Shares in aggregate, representing approximately 0.2 per cent. of the issued ordinary share capital of VT.

The Babcock Directors, who have received financial advice from J.P. Morgan Cazenove and Evercore Partners, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the Babcock Directors, J.P. Morgan Cazenove and Evercore Partners have relied upon the Babcock Directors' commercial assessment of the Acquisition. The Babcock Directors intend to recommend unanimously that Babcock Shareholders vote in favour of the resolutions to approve and implement the Acquisition, as the Babcock Directors intend to do in respect of their own beneficial holdings of 1,040,171 Babcock Shares in aggregate, representing approximately 0.5 per cent. of the issued ordinary share capital of Babcock.

5.           Background to, and reasons for, the Acquisition

Babcock has successfully delivered on its strategic objective of being a leading engineering support services company in the UK and selected overseas markets. The Babcock Board believes the Acquisition supports this strategy and that the combination of VT and Babcock brings together two highly complementary businesses with increased scale and capabilities in their core markets which will deliver significant benefits for customers and shareholders.

The Combined Group will offer complementary skills across a wider range of customers and the ability to offer a broader range of solutions.  In addition, the Babcock Board believes the Combined Group will be better positioned to build upon business opportunities and provide cost efficient solutions for its customers.  As a result, a combination will expand the size of the Combined Group's addressable markets, which will in turn be better placed to deliver against increasing customer demand for large and complex contracts.

Specifically, the Combined Group will have the following strengths across its core activities:

·     Defence

Breadth and depth across the MoD;

An extremely broad and deep capability in UK Air, Land and Sea;

Four main support areas: infrastructure, equipment support, training and communications; and

Combined strength to win larger, more complex contracts:

§ the increased scale and enhanced capability of the Combined Group will enable it to take on a broader range of larger, more complex support contracts and increase its work share.

·     Nuclear

A strong nuclear business with significant consultancy positions along with presence at tiers one, two and three;

Approximately 3,000 employees servicing defence and civil nuclear sectors;

Opportunity to build upon VT's strong customer relationship with Sellafield; and

Ability to cross sell VT's training and education expertise to Babcock's nuclear customers.

·     Critical Infrastructure

Strong civil business in government and regulated industries;

Well positioned to use enhanced range of skills and expertise to deliver broader range of customer solutions;

Opportunity to develop strong training and education business in a fragmented civil market; and

Main support areas of infrastructure, equipment support, education and training and communications.

·     International

Well positioned to use the Combined Group's enhanced range of skills and expertise to deliver a broader range of customer solutions in our existing International markets (USA, Canada, Australia, South Africa, Middle East and Eastern Europe):

§ Opportunities to sell complementary capabilities where the Combined Group has an established presence; and

§ Build on Babcock's and VT's excellent reputation for customer service, delivery and cost reduction.

Babcock has a long and successful track record of integrating acquisitions and delivering synergies for the benefit of shareholders and cost savings for the benefit of customers. In addition to the improved growth prospects of the Combined Group, the Babcock Directors believe the Acquisition will deliver merger benefits throughout the Combined Group, prior to any one-off expenses, of approximately £50 million per annum (pre-tax). It is expected that these merger benefits will be fully realised for the period ending 31 March 2013, with £30 million expected to be achieved in the financial year ended 31 March 2012. It is also expected that there will be financial efficiencies of a further £8 million per annum (post tax).  The one-off expenses involved in obtaining such synergies are anticipated to be approximately £45 million, all of which are expected to be incurred by the end of the second full financial year following completion of the Acquisition. These synergies are expected to be predominantly based on the realisation of significant cost savings through the elimination of duplicated functions.  These may include the sharing of resources between businesses, business reorganisations, rationalisation of the Combined Group's property portfolio, eliminating duplicate management teams at head and regional offices and associated overheads, and procurement savings. In addition, Babcock expects to achieve revenue synergies through an enhanced customer product and service offering.

Through a rapid but considered integration, as well as the mutual exchange of best practice in all functions, regions and market segments, the Combined Group will seek to maximise value opportunities for shareholders, customers and employees. The Babcock Board believes that the Acquisition will further enhance its proven capability to execute a profitable growth strategy and is expected to be accretive in terms of earnings per share in the first full financial year following completion of the Acquisition.

6.           Background to and reasons for the VT Board recommendation

Over the past five years, VT's strategy has been to build on its core engineering skill base and to develop into a broad based support services business.  The strategy has been highly successful and VT's transformation into a pure support services business was completed in October 2009 with the sale of its shareholding in the BVT joint venture with BAE Systems for gross proceeds of £299 million.

VT has delivered material value to its shareholders over the past five years.  The VT Board remains highly confident in the prospects for VT as a standalone business, supported by a very strong balance sheet, and that the rationale for its strategy of broadening its customer base and support services offering remains strong.

The VT Board believes however that, although VT has the opportunity to continue to develop under the present ownership structure, there is compelling financial logic for VT Shareholders to a combination of VT and Babcock on the terms of the Acquisition and that, together, the two businesses should be able to take advantage of the trend for contracts of increasing complexity and scale. The VT Board believes Babcock's offer delivers an attractive opportunity for VT Shareholders to benefit from (i) the immediate premium implicit in Babcock's offer, and (ii) the potential upside to the value of the Combined Group, including through the realisation of revenue and cost synergies.

 

 

 

2 These amounts include the previously announced merger benefits of approximately £27 million per annum (pre-tax), and the further benefit of approximately £6 million per annum expected to come from a reduction in the effective corporation tax rate of the Combined Group, each as previously announced by Babcock on 15 February 2010. Nothing in this announcement should be interpreted to mean that the future earnings per share of Babcock will necessarily match or exceed the historical earnings per share of Babcock or VT.

3 Nothing in this announcement should be interpreted to mean that the future earnings per share of Babcock will
  necessarily match or exceed the historical earnings per share of Babcock or VT.

 

 

7.           Information relating to Babcock

Babcock is a leading engineering support services company operating in the defence, nuclear, power generation and transmission markets.  Its customers are mainly government departments or blue chip companies operating in highly regulated markets, who own or operate strategically important assets requiring long-term maintenance and upgrade.  Babcock employs approximately 17,000 skilled people in the UK, Africa, North America and Australia across six divisions:

·     Marine:

Babcock has a leading naval support business with a critical role supporting the Royal Navy and the MoD. Key activities include base porting, refitting, refuelling and decommissioning submarines, maintaining and refitting warships, building the next generation aircraft carriers, managing naval bases and providing equipment support on behalf of the UK Government.

Babcock recently formed a new business unit within its Marine division to bring together the engineering, design, systems integration and platform management capabilities across the Babcock Group. Integrated Technology is one of the leading organisations of its type in the UK defence sector.

·     Defence:

Babcock provides facilities management, equipment support and training expertise to the MoD and civil customers, such as BAA. Key activities include facilities management for the MoD through two regional prime contracts, technical support to the Royal Air Force through multi-activity and Integrated Operation Support contracts, training to the Royal School of Military Engineers and support for baggage handling systems at London Heathrow.

·     Nuclear:

Babcock is one of the UK's largest nuclear engineering support services businesses with an operational Tier 1 position in the civil nuclear market and a direct relationship with the Nuclear Decommissioning Authority, complementing Babcock's Tier 1 position in the military nuclear market.

The division provides, through its Tier 2 and 3 positions, outage and maintenance support for current power generation and operation in the decommissioning and waste management markets. Key activities include outage support for operational reactors, decommissioning activities, waste management solutions and safety and risk analysis.

·     Networks:

Babcock operates in the high voltage power transmission, mobile and fixed telecommunications and digital broadcast infrastructure markets in the UK. Key activities include high voltage power transmission maintenance and upgrade, digital switchover antenna design and replacement, mobile telecommunications network upgrade and fixed line communications networks and next generation networks.

·     Rail:

Babcock is one of the UK's largest track renewals contractors and a major player in the rail infrastructure market. Key activities include traditional track renewal; signalling and control system installation and the provision of rail power solutions.

·     Engineering and Plant:

Operating mainly in South Africa, the division supports Eskom, the national power supplier, and operates the Volvo franchise for construction equipment. Key activities include maintenance and engineering support on power station boilers, construction, erection and maintenance of high voltage power lines and being the sole distributor of Volvo equipment to mining and infrastructure companies.

By combining a diverse range of services and capabilities, Babcock is able to offer fully integrated technical and engineering solutions to satisfy several different markets.

8.           Information relating to VT

VT is a leading international support services group, which generated sales of approximately £1.1 billion in the year ended 31 March 2009 (68 per cent. in the UK and 28 per cent. in North America), has an order book in excess of £4 billion and employs over 16,000 people.

In May 2009, VT undertook an internal reorganisation to increase its operational efficiency, to improve its relationships with key strategic customers, and to create opportunities for adding complementary work streams to its current activities.

Following this successful reorganisation, VT operates through three divisions: Defence, Government & Critical Services and VT Group Inc.:

Division

2009 sales

Activities

Defence

£428 m

Manages VT's activities in support of UK and non-US defence customers

Government & Critical Services

£376 m

Manages all civil contracts, including those in the training, education, environment, emergency services, and broadcasting and security sectors

VT Group Inc.

£303 m

Manages VT's US activities, including its relationships with the Department of Defense and NASA

 

9.           Financing of the Combined Group

The cash consideration payable to VT Shareholders under the terms of the Acquisition will be provided from new debt facilities. Babcock has today entered into a bridge facility of up to £400,000,000 and backstop facilities of up to £600,000,000, each arranged by J.P. Morgan plc and Lloyds TSB Bank plc.

Under the terms of the new debt facilities, Babcock has agreed that it will not (unless it is required by the Panel or by applicable law) amend, waive or modify the Conditions set out in paragraphs 4(a), (c) and (d) of Appendix 1 without the consent of the mandated lead arrangers under the bridge facility, and without the consent of lenders whose commitments represent in aggregate more than 50 per cent. of the total commitments under the backstop facilities.

In addition, Babcock has agreed that it will not waive or amend any other Condition in any material respect, where to do so could reasonably be expected to materially prejudice the interests of the lenders under the bridge facility and the backstop facilities, without the consent of the majority lenders under the bridge facility and the backstop facilities.

J.P. Morgan Cazenove and Evercore Partners, joint financial advisers to Babcock, are satisfied that sufficient resources are available to Babcock to satisfy in full the cash consideration payable to VT Shareholders under the terms of the Acquisition.

The Babcock Board believes it has a prudent capital structure consistent with the long term nature of many of its revenue streams and that Babcock will continue to be a highly cash generative business. Babcock expects its net debt to EBITDA ratio to be approximately 2.9 times at the time of completion of the Acquisition.

10.         Babcock current trading, trends and prospects

The Babcock Board believes that the financial year ending 31 March 2010 will prove to have been another excellent year of progress for Babcock.

Trading in the second half of the year has remained resilient, with no significant changes to market conditions and remains in line with the expectations outlined by Babcock in its Interim Management Statement released on 2 February 2010.

Babcock continues to benefit from the long-term nature of its contracts, the critical nature of the engineering support it provides and the strong relationships it has with its customers.  All of Babcock's major support contracts are performing well, with no significant changes to the levels of work coming through to Babcock's operating divisions.

Babcock believes that its strong market positions, as well as its track record of delivering efficiencies for customers, make it well placed to benefit from the economic pressures which are likely to continue to increase for its customers.

Babcock is confident that the long-term growth prospects for the Babcock Group's principal markets remain strong, supported by the strength of its order book and bid pipeline, and in the financial year ending 31 March 2011 Babcock expects to build further on the excellent progress it has made in previous years.

11.         VT current trading, trends and prospects

Since 28 January 2010, being the date of its last Interim Management Statement, VT has continued to perform in line with the VT Board's expectations.  The VT Board remains confident in the long-term prospects for VT's businesses.

12.         Dividend policy

Following completion of the Acquisition, it is the intention of the Babcock Directors to maintain a progressive dividend policy having regard to the availability of distributable reserves and cash, and taking into account the Combined Group's working capital and investment requirements.

13.         Management, employees and locations

Babcock has agreed that, upon completion of the Acquisition, the existing employment rights of all VT Group employees will be fully respected. In addition, Babcock has agreed that upon completion of the Acquisition, the existing pension rights of all the VT Group employees will be observed at least to the extent required by the applicable law and that it will not make any changes to the pension schemes that will adversely affect future service pension benefits provided to the VT Group employees for a period of at least 18 months from the date of this announcement. Following completion of the Acquisition, VT Shares will cease to be listed and the VT Share Schemes will therefore be withdrawn and VT employees will thereafter participate in the Babcock employee share schemes, as appropriate. Babcock's plans for VT do not otherwise involve any material change in the conditions of employment of VT employees.

Combining two substantial groups often provides opportunities for the combined group to realise significant cost savings through the elimination of duplicated functions. These may include the sharing of resources between businesses, business reorganisations and rationalisation of the combined group's property portfolio. In assessing the terms of the Acquisition, Babcock has made certain assumptions in relation to such savings, for example, in divisional and group head offices, centralised functions and data centres. The precise scope for realising any such cost savings in the context of the Combined Group, as well as the timings and manner of implementation, will be determined by Babcock following completion of the Acquisition.  Achieving any such cost savings is likely to lead to a number of job losses and office closures (or relocations) in some parts of the Combined Group. However, the Babcock Board believes that for the overwhelming majority of the Combined Group's employees the combination of Babcock and VT will be to their advantage, offering the opportunity of continued employment in a larger group, with the anticipated benefits the Babcock Board expects the combination to bring (as described further in paragraph 5 above).

Babcock has agreed in the Implementation Agreement (described further at paragraph 20 below) that where cost savings lead to job losses, it will ensure that employees of the VT Group in the United Kingdom and the United States who are made redundant as a consequence of the Acquisition within 24 months from the date of this announcement will be treated at least as favourably as they would be under the practices adopted by VT when implementing other recent redundancies.

14.         Employee Share Schemes

The Acquisition will extend to any VT Shares unconditionally allotted or issued prior to the Reorganisation Record Time, including shares issued pursuant to the exercise of options granted under the VT Share Schemes. Appropriate proposals will be made in due course to participants in the VT Share Schemes. Details of the proposals will be set out in the Scheme Document and in separate letters to be sent to participants in the VT Share Schemes.

15.         Scheme of Arrangement

It is intended that the Acquisition will be implemented by means of a Court-sanctioned scheme of arrangement between VT and its shareholders under Part 26 of the 2006 Act.  The Scheme will involve an application by VT to the Court to sanction the Scheme and to confirm the cancellation of all the Scheme Shares, in consideration for which Scheme Shareholders will receive consideration in accordance with the terms of the Acquisition. It is also intended as part of the Scheme to effect the Capital Reduction.

The Scheme will be subject to the Conditions and certain further terms referred to in paragraph 16 of, and at Appendix 1 to, this announcement, and to be included in the Scheme Document.

In particular, to become Effective, the Scheme requires the approval of Scheme Shareholders by the passing of a resolution at the Scheme Meeting.  The resolution must be approved by a majority in number present and voting at the Scheme Meeting, either in person or by proxy, representing not less than 75 per cent. in value of the Scheme Shares which are voted at the Scheme Meeting (or any adjournment thereof).

In addition, to become Effective, the Scheme also requires the passing at the VT General Meeting of certain resolutions which are necessary to implement the Scheme.  These resolutions are in respect of, among others:

·     the cancellation of any existing VT Shares and the approval of the issue of new ordinary shares in VT to Babcock (and/or its nominee(s)) in accordance with the Scheme; and

·     the amendment of VT's articles of association to ensure that the VT Shares issued under the VT Share Schemes will be subject to the Scheme or, if issued following the Reorganisation Record Time, will be automatically transferred to Babcock on the same terms as under the Scheme.

These resolutions require the approval of VT Shareholders representing at least 75 per cent. of the votes cast (either in person or by proxy), at the VT General Meeting which will be held immediately after the Scheme Meeting.

Following the Scheme Meeting and the VT General Meeting, the Scheme must be sanctioned and the Capital Reduction confirmed by the Court, and will only become effective on delivery to the Registrar of Companies of:

·     a copy of the First Court Order; and

·     a copy of the Second Court Order,

and, in the case of the Second Court Order, if the Court so orders for the Scheme to become Effective, it being registered by the Registrar of Companies together with the statement of capital attached to it.

Upon the Scheme becoming Effective, it will be binding on all Scheme Shareholders, irrespective of whether or not they attended or voted at the Scheme Meeting or the VT General Meeting.

The Scheme Document will include full details of the Scheme, together with notices of the Scheme Meeting and the VT General Meeting and the expected timetable, and will specify the action to be taken by Scheme Shareholders.

Babcock reserves the right to decide to implement the Acquisition by way of an Offer for the entire issued and to be issued share capital of VT not already held by Babcock. VT has agreed that, in the event that the Acquisition is implemented by way of an Offer, the offer document will contain the recommendation of the VT Directors, on a unanimous and unqualified basis, to VT Shareholders to accept the offer, except to the extent that the VT Directors have determined in good faith that such recommendation should be modified due to the requirements of Rule 3.1 of the Takeover Code to make the substance of any independent advice known to VT Shareholders and noting that the VT Directors retain the right to withdraw such recommendation in certain circumstances.

16.         Conditions to the Scheme becoming Effective

In addition to the Scheme conditions described in paragraph 15, the Acquisition will be subject to the satisfaction of additional conditions and certain further terms.

The Acquisition will be conditional upon the approval of the Babcock Resolution by Babcock Shareholders at the Babcock General Meeting and the Admission of the New Babcock Shares to trading on the London Stock Exchange and to listing on the Official List. Further information on the Babcock General Meeting is provided below at paragraph 18.

In addition, the Scheme will be subject to the satisfaction of certain anti-trust and regulatory conditions, including, amongst other things:

·     the OFT deciding not to refer the Acquisition to the UK Competition Commission and the Secretary of State for Business, Innovation and Skills not having giving an intervention notice to the OFT in respect of the Acquisition;

·     the CFIUS having given written notice to Babcock that it had completed its review of the Acquisition under applicable regulations without the President of the United States invoking his authority to block the Acquisition; and

·     the waiting periods under the United States Hart Scott Rodino Antitrust Improvements Act of 1976, and the regulations made thereunder in respect of the Acquisition, having expired or been terminated.

17.         VT delisting, cancellation of trading and re‑registration

It is intended that the London Stock Exchange will be requested to cancel trading in VT Shares on the London Stock Exchange's main market for listed securities and the UKLA will be requested to cancel the listing of the VT Shares from the Official List on the Effective Date.

Further, it is intended that, VT will be re‑registered as a private limited company immediately upon the Scheme becoming Effective.

If the Acquisition is effected by way of an Offer, it is anticipated that the cancellation of VT's listing and admission to trading will take effect no earlier than 20 Business Days after the date on which the Offer becomes or is declared unconditional in all respects. Delisting would significantly reduce the liquidity and marketability of any VT Shares not assented to the Offer at that time.

If the Acquisition is effected by way of an Offer and such Offer becomes or is declared unconditional in all respects and sufficient acceptances are received, Babcock intends to exercise its rights to acquire compulsorily the remaining VT Shares in respect of which the offer has not been accepted under Chapter 3 Part 28 of the 2006 Act.

18.         Babcock shareholder approval and Prospectus

In view of the size of the Acquisition and in order to implement it, it will be necessary for the Babcock Shareholders to approve the Acquisition and the allotment of the Consideration Shares.  A general meeting will be convened for this purpose.  The Babcock Circular convening the general meeting will be sent to Babcock Shareholders in due course.

The Babcock Resolution set out on the Babcock Circular will require the approval of the Babcock Shareholders representing more than 50 per cent. of the votes cast at the Babcock General Meeting (either in person or by proxy).

          Babcock will also be required to publish a prospectus in connection with the issue of the New Babcock Shares.  The Prospectus will be published as soon as practicable and will contain information on the Combined Group and the New Babcock Shares.

19.         Listings, dealings and settlement

Fractions of Consideration Shares will not be allotted or issued to VT Shareholders. Fractional entitlements to Consideration Shares will be aggregated and sold in the market and the net proceeds of sale distributed pro rata to the Scheme Shareholders entitled thereto.

The Consideration Shares will be issued credited as fully paid and will rank pari passu in all respects with the existing Babcock Shares, including the right to receive in full all dividends and other distributions (if any) declared, made or paid by reference to a record date after the Effective Date (and therefore they will not carry any entitlement to any final dividend or second interim dividend of Babcock declared made or paid in respect of the financial year ending 31 March 2010).  As a result of the Acquisition, Babcock intends to pay a second interim dividend to Babcock Shareholders by reference to a record date prior to the Effective Date and which will, assuming the Acquisition becomes Effective, be in lieu of a final dividend for the financial year ending 31 March 2010. The amount of the second interim dividend will be announced in Babcock's preliminary results for the year ending 31 March 2010 and will be paid shortly after the Effective Date.

Application will be made to the UKLA for the New Babcock Shares to be admitted to the Official List and application will be made to the London Stock Exchange for the New Babcock Shares to be admitted to the London Stock Exchange's main market for listed securities.  It is expected that Admission will become effective and that dealings for normal settlement in the New Babcock Shares will commence on the London Stock Exchange at 8.00 a.m. on the first Business Day following the Effective Date.

20.         Implementation Agreement

Babcock and VT have entered into an Implementation Agreement in relation to the Acquisition which contains provisions regarding the implementation of the Acquisition and certain assurances and confirmations between the parties (including terms regarding the conduct of the businesses of Babcock and VT pending implementation of the Acquisition).

Non‑solicitation arrangements

VT has undertaken, amongst other things, not to, and to procure that members of the VT Group and their respective directors, employees and advisers shall not, solicit, initiate, encourage or otherwise seek to procure an Alternative Offer.

VT has also undertaken to notify Babcock immediately of any approach that is made to it or any other member of the VT Group or its directors, employees, advisers or agents in relation to an Alternative Offer.

Break fee arrangements

VT has agreed to pay Babcock a break fee of £13,258,825 if:

(a)             the recommendation of the VT Directors of the Acquisition is either (a) withdrawn or (b) qualified or modified adversely and in a material respect, unless in each case: (i) if an event triggering the payment of a break fee described in paragraph (b) below has already occurred; (ii) following an event that leads to any of the Conditions in paragraphs 4(i)(i), 4(i)(ii), 4(i)(iii), 4(i)(ix) or 4(j)(i) of Appendix 1 being invoked by VT; or (iii) an event triggering the payment of the Babcock break fee described below has already occurred;

(b)             an Alternative Offer is announced (under Rule 2.4 or Rule 2.5 of the Takeover Code, in respect of an Alternative Offer which is subject to the Takeover Code, or otherwise, in respect of other Alternative Offers which are not subject to the Takeover Code) at any time before the Scheme (or, if applicable, any Offer) lapses or is withdrawn and that Alternative Offer subsequently becomes or is declared unconditional in all respects or is otherwise completed or implemented

In addition, Babcock has agreed to pay VT a break fee of £12,228,421 if the recommendation of the Babcock Directors of the Acquisition set out in the Babcock Circular is subsequently either (a) withdrawn or (b) qualified or modified adversely and in a material respect, in each case other that: (i) following an event that leads to a Condition (other than, in each case only to the extent that such Conditions relate to Babcock, any of Conditions in paragraphs 4(i)(i), 4(i)(ii), 4(i)(iii), 4(i)(ix) or 4(j)(i)of Appendix 1,) being invoked; or (ii) if any event triggering the payment of the VT break fee described above has already occurred.

21.         Irrevocable undertakings

Babcock has received irrevocable undertakings to vote in favour of the resolutions to be proposed at the Scheme Meeting and the VT General Meeting (or, if applicable, to accept the Offer) from the VT Directors who hold VT Shares in respect of aggregate holdings of 436,148 VT Shares, representing approximately 0.2 per cent. of the entire existing issued VT Shares.

Further details of these irrevocable undertakings are set out in Appendix 3 to this announcement.

22.         Interests

Save in respect of the irrevocable undertakings referred to above and as disclosed below, as at the close of business on 19 March 2010 (being the last practicable Business Day prior to the date of this announcement) neither Babcock, nor any of the Babcock Directors, nor, so far as Babcock is aware, any person acting in concert with Babcock has: (i) any interest in or right to subscribe for any relevant securities of VT, nor (ii) any short positions in respect of relevant VT Shares (whether conditional or absolute and whether in the money or otherwise), including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery, nor (iii) borrowed or lent any relevant VT Shares:

Name

Number of VT Shares (Long)

Number of VT Shares (Short)

JP Morgan Clearing Corp.

238,084

-

J.P. Morgan Securities Ltd.

-

137,727

JP Morgan Asset Management (UK) Limited

1,405,924

-

 

23.         Overseas shareholders

The availability of the New Babcock Shares under the terms of the Acquisition to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdiction. Such persons should inform themselves about and observe any applicable requirements. Further details in relation to overseas shareholders will be contained in the Scheme Document.

24.         General and documentation

The Acquisition will be governed by English law and will be subject to the jurisdiction of the English courts.

The Acquisition will be on the terms and subject to the conditions set out herein and in Appendix 1, and to be set out in the Scheme Document. 

The formal Scheme Document will be sent to VT Shareholders (other than certain overseas shareholders) as soon as practicable. At the same time or as nearly as practicable at the same time, the Babcock Circular convening the Babcock General Meeting will be sent to Babcock Shareholders and the Prospectus giving financial and other information in relation to Babcock and the Combined Group will be published.

In accordance with Rule 2.10 of the Code, VT has in issue 180,409,726 ordinary shares of 5 pence each.  The ISIN for the shares is GB0031729733.

VT holds no treasury shares.

 

Babcock International Group PLC

Peter Rogers, Chief Executive

Tel: +44 (0)20 7355 5300

Bill Tame, Group Finance Director


Franco Martinelli, Group Financial Controller


J.P. Morgan Cazenove (joint financial adviser and corporate broker to Babcock)

Andrew Truscott

Tel: +44 (0)20 7588 2828

Malcolm Moir


Guy Marks


Christopher Dickinson


Evercore Partners (joint financial adviser to Babcock)

Bernard Taylor

Tel: +44 (0)20 7268 2700

Julian Oakley


Financial Dynamics (PR adviser to Babcock)

Andrew Lorenz

Tel: +44 (0)20 7269 7291

Richard Mountain


VT Group plc


Paul Lester

Tel: +44 (0)23 8083 9001

Philip Harrison


Rothschild (financial adviser to VT)

Robert Leitão

Tel: +44 (0)20 7280 5000

Ravi Gupta

 

Merrill Lynch (corporate broker to VT)

Mark Astaire

Tel: +44 (0)20 7628 1000

Peter Brown

 

Citigate Dewe Rogerson (PR adviser to VT)

Ginny Pulbrook

Tel: +44 (0)20 7638 9571

Patrick Donovan


 

J.P. Morgan plc, which conducts its UK investment banking businesses as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the FSA, is acting as financial adviser to Babcock and no-one else in connection with the contents of this announcement and will not be responsible to any person other than Babcock for providing the protections afforded to customers of J.P. Morgan plc nor for providing advice in relation to any matter referred to herein.

Evercore Partners Limited is authorised and regulated in the United Kingdom by the FSA, is acting as financial adviser to Babcock and for no-one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Babcock for providing the protections afforded to clients of Evercore Partners Limited nor for providing advice in relation to any matter referred to herein.

Rothschild and Merrill Lynch are authorised and regulated in the United Kingdom by the FSA, are acting for VT and for no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than VT for providing the protections afforded to clients of Rothschild and Merrill Lynch nor for providing advice in relation to any matter referred to herein.

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities. This announcement has been prepared in accordance with English law and the Takeover Code and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside of the United Kingdom.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purposes of complying with English law and the Takeover Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of England.

This announcement is not intended to, and does not constitute, or form part of, an offer to sell or an invitation to purchase or subscribe for any securities or a solicitation of any vote or approval in any jurisdiction. This announcement does not constitute a prospectus or a prospectus equivalent document. Shareholders of Babcock and VT are advised to read carefully the formal documentation in relation to the Acquisition once it has been despatched. The proposals of the Acquisition will be made solely through the Scheme Document, which will contain the full terms and conditions of the Scheme, including details of how to vote with respect to the Scheme. Any response to the proposals should be made only on the basis of the information in the Scheme Document.

Overseas jurisdictions

This announcement is not an offer of, or solicitation of an offer to purchase, securities in the United States and the New Babcock Shares, which will be issued in connection with the Acquisition, have not been, and will not be, registered under the US Securities Act or under the securities law of any state, district or other jurisdiction of the United States, Australia, Canada or Japan and no regulatory clearance in respect of the New Babcock Shares has been, or will be, applied for in any jurisdiction other than the UK.

The New Babcock Shares may not be offered, sold, or, delivered, directly or indirectly, in, into or from the United States absent registration under the US Securities Act or an exemption from registration. It is expected that the New Babcock Shares to be issued in the Scheme will be issued in reliance upon the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) thereof. Under applicable US securities laws, persons (whether or not US persons) who are or will be "affiliates" (within the meaning of the US Securities Act) of Babcock or VT prior to, or of Babcock after, the Effective Date will be subject to certain transfer restrictions relating to the New Babcock Shares received in connection with the Scheme.

If the Acquisition is implemented by way of an Offer, it will be made in accordance with the procedural and filing requirements of US securities laws, to the extent applicable.

The Acquisition relates to the shares of a UK company and is proposed to be made by means of a scheme of arrangement provided for under the laws of England and Wales. The Acquisition is subject to the disclosure requirements and practices applicable in the United Kingdom to schemes of arrangement, which may differ from the disclosure and other requirements of the securities laws of jurisdictions other than the United Kingdom. Financial information included in the relevant documentation will have been prepared in accordance with accounting standards applicable in the United Kingdom that may not be comparable to the financial statements of non-U.K. companies.

The New Babcock Shares may not be offered, sold, resold, delivered or distributed, directly or indirectly, in, into or from Canada, Australia or Japan or to, or for the account or benefit of, any resident of Australia, Canada or Japan absent an exemption from registration or an exemption under relevant securities law. Copies of this announcement and any formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from Canada, Australia or Japan and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in, into or from Canada, Australia or Japan.

Forward-looking statements

Certain statements in this announcement are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement. Except as required by law, neither of Babcock or VT is under an obligation to update or keep current the forward-looking statements contained in this announcement or to correct any inaccuracies which may become apparent in such forward-looking statements.

No statement in this announcement is intended as a profit forecast or profit estimate and no statement in this announcement should be interpreted to mean that the future earnings per share of the Combined Group, Babcock and/or VT for current or future financial years will necessarily match or exceed the historical or published earnings per share of Babcock or VT.

Dealing Disclosure Requirements

Under the provisions of Rule 8.3 of the Code, if any person is, or becomes, 'interested' (directly or indirectly) in 1 per cent. or more of any class of 'relevant securities' of Babcock or of VT, all 'dealings' in any 'relevant securities' of Babcock or of VT (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by not later than 3.30 p.m. (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which any offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of Babcock or VT, they will be deemed to be a single person for the purpose of Rule 8.3.

Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of Babcock or of VT by Babcock or VT or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.

A disclosure table, giving details of companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.

'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.

Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8, you should consult the Panel.

 Publication on Babcock website

A copy of this announcement will be available on Babcock's website at (www.babcock.co.uk) by no later than 12 noon (London time) on 24 March 2010

 


APPENDIX 1

CONDITIONS AND FURTHER TERMS OF THE ACQUISITION

PART A

Conditions to the Acquisition

The Acquisition will be conditional upon the Scheme becoming unconditional and becoming Effective by not later than 31 August 2010 or such later date (if any) as Babcock and VT may, with the consent of the Panel, agree and (if required) the Court may approve.

1.           The Scheme will be subject to the following conditions:

(a)             its approval by a majority in number representing not less than three‑fourths in value of the Scheme Shareholders (or the relevant class or classes thereof, if applicable) who are on the register of members of VT at the Scheme Voting Record Time, present and voting, whether in person or by proxy, at the Scheme Meeting and any separate class meeting which may be required by the Court or any adjournment thereof;

(b)             the resolutions required to approve and implement the Scheme being duly passed at the VT General Meeting (or any adjournment thereof); and

(c)             the sanction of the Scheme and the confirmation of the Capital Reduction by the Court (in either case with or without modification (but subject to such modification being acceptable to Babcock and VT)), office copies of the Court Orders and of a statement of capital being delivered to the Registrar of Companies and, if the Court so orders for the Scheme to become Effective, registration of the Second Court Order confirming the Capital Reduction with the Registrar of Companies.

2.           The Acquisition will be conditional upon the passing at the Babcock General Meeting (or at any adjournment thereof) of the Babcock Resolution.

3.           The Acquisition will also be conditional upon the Admission to the Official List of the New Babcock Shares becoming effective in accordance with the Listing Rules and the Admission of such shares to the London Stock Exchange's market for listed securities becoming effective in accordance with the LSE Admission Standards or (if Babcock and VT so determine and subject to the consent of the Panel) the UKLA agreeing or confirming its decision to admit such shares to the Official List and the London Stock Exchange agreeing to admit such shares to trading subject only to (i) allotment of such shares and/or (ii) the Scheme becoming Effective.

4.           Subject to the provisions of paragraphs 5 and 6 of this Part A and the requirements of the Panel in accordance with the Takeover Code, the Acquisition will also be conditional upon, and accordingly the necessary actions to implement the Acquisition will only be taken on, the satisfaction or, where relevant, waiver of the following Conditions:

(a)             the Office of Fair Trading ("OFT") deciding, in terms reasonably satisfactory to Babcock and VT, not to refer the Acquisition or any matter arising therefrom to the UK Competition Commission;

(b)             the Secretary of State for Business, Innovation and Skills not giving an intervention notice to the OFT under s.42(2) of the Enterprise Act 2002 in respect of the Acquisition prior to the OFT's decision referred to in (b) above;

(c)             any applicable waiting periods under the United States Hart‑Scott‑Rodino Antitrust Improvements Act of 1976 (as amended) and the regulations made thereunder relating to the Acquisition having expired or been terminated;

(d)             the CFIUS having given written notice to Babcock that it has completed its review under the Exon-Florio Amendment and the Foreign Investment and National Security Act without the President of the United States invoking his authority under Exon-Florio Amendment to block the Acquisition;

(e)             no material undertakings or assurances being sought from Babcock, any member of the Wider Babcock Group or any member of the Wider VT Group with respect to the continuing operations of any member of the Wider Babcock Group or Wider VT Group by the MoD or any other third party, except on terms reasonably satisfactory to Babcock and VT;

(f)              no government or governmental, quasi‑governmental, supranational, statutory, regulatory, environmental, administrative, fiscal or investigative body, court, trade agency, association, institution or any other body or person whatsoever in any jurisdiction (each a "Third Party") having decided to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference, or having required any action to be taken or otherwise having done anything or having enacted, made or proposed any statute, regulation, decision, order and there not continuing to be outstanding any statute, regulation, decision or order which would or might reasonably be expected to:

(i)        make the Acquisition, its implementation or the acquisition or proposed acquisition of any shares or other securities in, or control of, VT by any member of the Wider Babcock Group void, illegal and/or unenforceable under the laws of any jurisdiction, or otherwise directly or indirectly prohibit, or materially restrain, restrict, delay or otherwise interfere with the implementation of, or impose material additional conditions or obligations with respect to, or otherwise materially challenge or require material amendment of the Acquisition;

(ii)       require, prevent or materially delay the divestiture or materially alter the terms envisaged for such divestiture by any member of the Wider Babcock Group or by any member of the Wider VT Group of all or any part of its businesses, assets or property or impose any limitation on the ability of any of them to conduct their respective businesses (or any part thereof) or to own any of their assets or properties (or any part thereof) in either such case to an extent which is material in the context of the VT Group taken as a whole or the Babcock Group taken as a whole (as the case may be);

(iii)      impose any material limitation on, or result in a material delay in, the ability of any member of the Wider Babcock Group directly or indirectly to acquire or hold or to exercise effectively all or any rights of ownership in respect of shares or other securities in VT or on the ability of any member of the Wider VT Group or any member of the Wider Babcock Group directly or indirectly to hold or exercise effectively any rights of ownership in respect of shares or other securities (or the equivalent) in, or to exercise management control over, any member of the Wider Babcock Group;

(iv)      except pursuant to Chapter 3 of Part 28 of the 2006 Act, require any member of the Wider Babcock Group or the Wider VT Group to acquire or offer to acquire any shares, other securities (or the equivalent) or interest in any member of the Wider VT Group owned by any third party (other than in the implementation of the Acquisition);

(v)       require, prevent or materially delay a divestiture by any member of the Wider Babcock Group of any shares or other securities (or the equivalent) in any member of the Wider VT Group;

(vi)      result in any member of the Wider VT Group ceasing to be able to carry on business under any name under which it presently carries on business to an extent which is material in the context of the VT Group taken as a whole;

(vii)     impose any material limitation on the ability of any member of the Wider Babcock Group or any member of the Wider VT Group to integrate or co‑ordinate all or any part of its business with all or any part of the business of any other member of the Wider Babcock Group and/or the Wider VT Group which is adverse to and material in the context of the group concerned taken as a whole; or

(viii)    otherwise affect the business, assets or profits of any member of the Wider VT Group or any member of the Wider Babcock Group in a manner which is adverse to and material in the context of the VT Group taken as a whole or of the obligations of any members of Babcock Group taken as a whole in connection with the Acquisition,

and all applicable waiting and other time periods during which any such Third Party could decide to take, institute, implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or take any other step under the laws of any jurisdiction in respect of the Acquisition or the acquisition or proposed acquisition of any VT Shares or otherwise intervene having expired, lapsed, or been terminated;

(g)             all necessary or appropriate notifications, filings or applications having been made in connection with the Acquisition and all necessary waiting periods (including any extensions thereof) under any applicable legislation or regulation of any jurisdiction having expired, lapsed or been terminated (as appropriate) and all statutory and regulatory obligations in any jurisdiction having been complied with in connection with the Acquisition and all Authorisations necessary or appropriate in any jurisdiction for or in respect of the Acquisition and the acquisition or the proposed acquisition of any shares or other securities in, or control of, VT by any member of the Wider Babcock Group having been obtained in terms and in a form reasonably satisfactory to Babcock and VT from all appropriate Third Parties or (without prejudice to the generality of the foregoing) from any person or bodies with whom any member of the Wider VT Group or the Wider Babcock Group has entered into contractual arrangements and all such Authorisations necessary or appropriate to carry on the business of any member of the Wider VT Group in any jurisdiction having been obtained in each case where the direct consequence of a failure to make such notification or filing or to wait for the expiry, lapse or termination of any such waiting period or to comply with such obligation or obtain such Authorisation would have a material adverse effect on the VT Group taken as a whole, any member of the Babcock Group taken as a whole or the ability of Babcock to implement the Acquisition and all such Authorisations remaining in full force and effect at the time at which the Acquisition becomes otherwise unconditional and there being no notice of an intention to revoke, suspend, restrict, modify or not to renew such Authorisations;

(h)             except as fairly disclosed in the annual report and accounts of VT for the year ended 31 March 2009 or the interim results of VT for the half year ended 30 September 2009 or as publicly announced to a Regulatory Information Service by or on behalf of VT or as fairly disclosed in writing by VT to Babcock prior to the date of this announcement, there being no provision of any arrangement, agreement, licence, permit, lease or other instrument to which any member of the Wider VT Group is a party or by or to which any such member or any of its assets is or may be bound or be subject which, or any event or circumstance having occurred which, under any arrangement, agreement, licence, permit, lease or other instrument to which any member of the Wider VT Group is a party or by or to which any such member or any of its assets is or may be bound or be subject, would result in, as a consequence of the Acquisition or the acquisition or the proposed acquisition by any member of the Wider Babcock Group of any shares or other securities in VT or because of a change in the control or management of any member of the Wider VT Group or otherwise, could or might reasonably be expected to result in, in each case to an extent which is material in the context of the VT Group taken as a whole:

(i)        any monies borrowed by, or any other indebtedness, actual or contingent, of any member of the Wider VT Group being or becoming repayable, or capable of being declared repayable, immediately or prior to its or their stated maturity date or repayment date, or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited or being capable of becoming or being withdrawn or inhibited;

(ii)       the rights, liabilities, obligations, interests or business of any member of the Wider VT Group under any such arrangement, agreement, licence, permit, lease or instrument or the interests or business of any member of the Wider VT Group in or with any other firm or company or body or person (or any agreement or arrangement relating to any such business or interests) being terminated or adversely modified or affected or any onerous obligation or liability arising or any adverse action being taken thereunder;

(iii)      any member of the Wider VT Group ceasing to be able to carry on business under any name under which it presently carries on business to an extent which is material in the context of the VT Group taken as a whole;

(iv)      any assets or interests of, or any asset the use of which is enjoyed by, any member of the Wider VT Group being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged or could cease to be available to any member of the Wider VT Group otherwise than in the ordinary course of business;

(v)       the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any member of the Wider VT Group;

(vi)      the value of, or the financial or trading position of, any member of the Wider VT Group being prejudiced or adversely affected; or

(vii)     the creation of any liability (actual or contingent) by any member of the Wider VT Group otherwise than in the ordinary course of business;

(i)              except as fairly disclosed in (1) the annual report and accounts of VT for the year ended 31 March 2009, (2) the interim results of VT for the half year ended 30 September 2009, (3) the annual report and accounts of Babcock for the year ended 31 March 2009, (4) the interim results of Babcock for the half year ended 30 September 2009, (5) as publicly announced to a Regulatory Information Service by or on behalf of VT or Babcock or (6) as fairly disclosed in writing by or on behalf of VT or Babcock to the other prior to the date of this announcement, no member of the Wider VT Group and, in relation to paragraphs (i), (ii), (iii) and (ix) only, no member of the Wider Babcock Group having:

(i)        issued or agreed to issue or authorised the issue of additional shares of any class, or securities or securities convertible into, or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities (save, where relevant, as between VT and wholly‑owned subsidiaries of VT or as between Babcock and wholly-owned subsidiaries of Babcock (as appropriate) and save for the issue of VT Shares or Babcock Shares (as appropriate) on the exercise of options granted before the date of this announcement in the ordinary course);

(ii)       recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution (whether payable in cash or otherwise) other than to VT or one of its wholly‑owned subsidiaries or to Babcock or one of its wholly-owned subsidiaries (as appropriate) or in the case of Babcock only, save for any final dividend, or second interim dividend in lieu of a final dividend, declared, made or paid in respect of the financial year ending 31 March 2010 (and provided that the amount of any such dividend is consistent with Babcock's past practice and its stated dividend policy);

(iii)      merged with (by statutory merger or otherwise) or demerged from or acquired any body corporate, partnership or business or acquired or disposed of, or, transferred, mortgaged or charged or created any security interest over, any assets or any right, title or interest in any asset (including shares and trade investments) or authorised, proposed or announced any intention to do so, in each case, other than in the ordinary course of business and save for transactions between VT and its wholly‑owned subsidiaries or between such wholly‑owned subsidiaries or  between Babcock and its wholly-owned subsidiaries or between such wholly‑owned subsidiaries (as appropriate);

(iv)      save as between VT and its wholly‑owned subsidiaries or between such wholly owned subsidiaries, made or announced an intention to propose any change in its loan capital;

(v)       issued, authorised or proposed the issue of any debentures or (save in the ordinary course of business and save as between VT and its wholly‑owned subsidiaries or between such wholly owned subsidiaries), incurred or increased any indebtedness or become subject to any contingent liability to an extent which is material in the context of the VT Group taken as a whole;

(vi)      entered into or varied or authorised or announced its intention to enter into or vary any contract, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise) (otherwise than in the ordinary course of business) which is of a long term, unusual or onerous nature, or which involves or could involve an obligation of a nature or magnitude which is, in any such case, material in the context of the VT Group taken as a whole or which is or is likely to be materially restrictive on the business of any member of the Wider VT Group taken as a whole or the Wider Babcock Group taken as a whole;

(vii)     entered into or materially varied the terms of any service agreement with any director or senior executive of the Wider VT Group to an extent which is material in the context of the VT Group;

(viii)    proposed, agreed to provide or modified in any material respect the terms of any share option scheme, incentive scheme, or other benefit relating to the employment or termination of employment of any employee of the Wider VT Group which, taken as a whole, are material in the context of the VT Group taken as a whole;

(ix)      subject to any such act being material in the context of the VT Group  as a whole or the Babcock Group as a whole (as appropriate), and except as required by law or any regulatory body or competent legal authority, made or agreed or consented to any significant change to the terms of the trust deeds constituting the pensions schemes established for its directors, employees or their dependants or the benefits which accrue, or to the pensions which are payable, thereunder, or to the basis on which qualification for, or accrual or entitlement to, such benefits or pensions are calculated or determined or, as set out in any scheme specific funding valuation (under Part 3 of the Pensions Act 2004) of the scheme or schedule of contributions or other agreement between VT or Babcock (as appropriate) and the trustee, the basis on which the liabilities (including pensions) of such pension schemes are funded or valued, or agreed or consented to any change to the trustees or trustee directors (except a simple replacement of a trustee or trustee director who has resigned), or entered into one or more specific significant bulk annuity contracts in relation to any such pension scheme or carried out any act which would lead to the commencement of the winding up of the scheme or which would give rise directly or indirectly to a significant liability arising out of the operation of sections 38 to 56 inclusive of the Pensions Act 2004 in relation to the scheme;

(x)       implemented or effected, or authorised or announced its intention to implement or effect, any composition, assignment, reconstruction, amalgamation, commitment, scheme or other transaction or arrangement (other than the Acquisition) otherwise than in the ordinary course of business;

(xi)      other than by a wholly‑owned subsidiary of VT, purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or reduced or, save in respect of the matters mentioned in sub‑paragraph (i) above, made any other change to any part of its share capital to an extent which (other than in the case of VT) is material in the context of the VT Group;

(xii)     waived or compromised any claim otherwise than in the ordinary course of business which is material in the context of the VT Group taken as a whole;

(xiii)    made any material alternation to its memorandum or articles of association or other incorporation documents;

(xiv)    other than in respect of a body corporate which was dormant and solvent at the relevant time, taken or proposed any corporate action or had any legal proceedings instituted or threatened in writing against it for its winding up (voluntary or otherwise), dissolution, reorganisation or for the appointment of any administrator, receiver, manager, administrative receiver, trustee or similar officer of all or any of its assets or revenues or any analogous proceedings in any jurisdiction or appointed any analogous person in any jurisdiction or had any such person appointed;

(xv)     been unable, or admitted in writing that it is unable, to pay its debts or commenced negotiations with one or more of its creditors with a view to rescheduling or restructuring any of its indebtedness, or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business; or

(xvi)    entered into any contract, commitment, agreement or arrangement otherwise than in the ordinary course of business or passed any resolution or made any offer (which remains open for acceptance) with respect to, or announced an intention to, effect any of the transactions, matters or events referred to in this condition;

(j)              except as fairly disclosed in (1) the annual report and accounts of VT for the year ended 31 March 2009, (2) the interim results of VT for the half year ended 30 September 2009, (3) the annual report and accounts of Babcock for the year ended 31 March 2009, (4) the interim results of Babcock for the half year ended 30 September 2009, (5) as publicly announced to a Regulatory Information Service by or on behalf of VT or Babcock or (6) as fairly disclosed in writing by or on behalf of VT or Babcock to the other prior to the date of this announcement, in respect of Babcock in relation to paragraph (i) only:

(i)        there having been no adverse change in the business, assets, financial or trading position or profits or operational performance of any member of the Wider VT Group or the Wider Babcock Group (as appropriate) to an extent which is material to the VT Group taken as a whole or the Babcock Group taken as a whole (as appropriate);

(ii)       no litigation, arbitration proceedings, prosecution or other legal proceedings having been threatened, announced or instituted by or against or remaining outstanding against any member of the Wider VT Group or to which any member of the Wider VT Group is or may become a party (whether as claimant or defendant or otherwise) and no enquiry or investigation by, or complaint or reference to, any Third Party against or in respect of any member of the Wider VT Group having been threatened, announced or instituted by or against, or remaining outstanding in respect of, any member of the Wider VT Group which, in any such case, might reasonably be expected materially and adversely to affect the VT Group taken as a whole;

(iii)      no contingent or other liability having arisen or become known to Babcock which would or would reasonably be expected to adversely affect the business, assets, financial or trading position or of any member of the Wider VT Group to an extent which is material to the VT Group taken as a whole; and

(iv)      no steps having been taken and no omissions having been made which are likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the Wider VT Group, which is necessary for the proper carrying on of its business and which is material in the context of the VT Group taken as a whole;

(k)             except as fairly disclosed in the annual report and accounts of VT for the year ended 31 March 2009 or the interim results of VT for the half year ended 30 September 2009 or as publicly announced to a Regulatory Information Service by or on behalf of VT or as fairly disclosed in writing by or on behalf of VT to Babcock prior to the date of this announcement, Babcock not having discovered:

(i)        that any financial, business or other information concerning the Wider VT Group publicly disclosed or disclosed to any member of the Wider Babcock Group at any time by or on behalf of any member of the Wider VT Group which is material in the context of the VT Group taken as a whole is misleading to a material extent, contains a material misrepresentation of fact or omits to state a fact necessary to make that information not misleading to a material extent;

(ii)       that any member of the Wider VT Group is subject to any liability, contingent or otherwise, which is not disclosed in the annual report and accounts of VT for the year ended 31 March 2009 or the interim results of VT for the half year ended 30 September 2009, and which is material in the context of the VT Group taken as a whole; or

(iii)      any information which affects the import of any information disclosed to Babcock at any time before the date of this announcement by or on behalf of any member of the Wider VT Group which is material in the context of the VT Group taken as a whole; and

(l)              except as disclosed in writing to Babcock prior to this announcement, Babcock not having discovered:

(i)        that any past or present member of the Wider VT Group has not complied with all applicable legislation or regulations of any jurisdiction or any Authorisations relating to the storage, carriage, disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to impair the environment (including property) or harm human health or otherwise relating to environmental matters or the health and safety of humans, which non‑compliance would be likely to give rise to any material liability including any penalty for non‑compliance (whether actual or contingent) on the part of any member of the Wider VT Group; or

(ii)       that there is or is likely to be any liability (whether actual or contingent) or requirement to make good, remediate, repair, re‑instate or clean up any property or asset currently or previously owned, occupied or made use of by any past or present member of the Wider VT Group (or on its behalf), under any environmental legislation, common law, regulation, notice, circular, Authorisation, other legally binding requirement or order of any Third Party in any such case to an extent which is material in the context of the VT Group.

5.           Subject to the requirements of the Panel in accordance with the Takeover Code, Babcock shall have the right to invoke any of the above Conditions (save for Conditions 4(i)(i), 4(i)(ii), 4(i)(iii), 4(i)(ix) or 4(j)(i) which in each case Babcock shall only be able to invoke to the extent that such Conditions relate to VT) and Babcock reserves the right to waive, in whole or in part, all or any of the above Conditions, except Conditions 1, 2 and 3, and to the extent that such Conditions relate to VT, Conditions 4(i)(i), 4(i)(ii), 4(i)(iii), 4(i)(ix) or 4(j)(i).

6.           Subject to the requirements of the Panel in accordance with the Takeover Code, VT shall have the right to invoke any of Conditions 4(i)(i), 4(i)(ii), 4(i)(iii), 4(i)(ix) or 4(j)(i) in each case only to the extent that such Conditions relate to Babcock and reserves the right to waive, in whole or in part, all or any of such Conditions.

7.           If Babcock is required by the Panel to make an offer for VT Shares under the provisions of Rule 9 of the Takeover Code, Babcock may make such alterations to the terms and conditions of the Acquisition as are necessary to comply with the provisions of that Rule.

PART B

Further Terms of the Acquisition

8.           Babcock reserves the right to elect to implement the Acquisition by way of a takeover offer as an alternative to the Scheme. In such event, the Acquisition will be implemented on the same terms (subject to appropriate amendments) of the shares to which the Acquisition relates and those required by, or deemed appropriate by, Babcock under applicable law, so far as applicable) as those which would apply to the Scheme.  Further, if sufficient acceptances of such offer are received and/or sufficient VT Shares are otherwise acquired, it is the intention of Babcock to apply the provisions of the Companies Act 2006 to require compulsorily any outstanding VT Shares to which such offer relates.

9.           The Acquisition will not proceed if, after the date of this announcement and before the VT General Meeting, the acquisition is referred to the UK Competition Commission.

10.         The Acquisition will be governed by English law and be subject to the jurisdiction of the English courts, and to the Conditions set out in this announcement and in the Scheme Document.



APPENDIX 2

sources and bases of information

Save as otherwise stated, the following constitute the sources and bases of certain information referred to in this announcement:

1.   Financial information relating to Babcock has been extracted or provided (without material adjustment) from the audited annual report and accounts for Babcock for the year ended 31 March 2009 and/or the unaudited interim results for the half year ended 30 September 2009.

2.   Financial information relating to VT has been extracted or provided (without material adjustment) from the audited annual report and accounts for VT for the year ended 31 March 2009 and/or the unaudited interim results for the half year ended 30 September 2009.

3.   The terms of the Acquisition value the entire issued ordinary share capital of VT at £1,326 million, based on (i) the Closing Price of 532.5 pence per Babcock Share on 22 March 2010, being the last practicable date prior to this announcement, and (ii) 180,409,726 VT Shares being in issue as at 22 March 2010.

4.   The percentage of shares expected to be held by VT Shareholders in the Combined Group is based on approximately 126.5million Consideration Shares being issued pursuant to the Acquisition and 229,641,704 Babcock Shares currently in issue as at 22 March 2010 (but excludes any Consideration Shares in respect of VT Shares to be issued under the VT Share Schemes).

5.   The number of Consideration Shares to be issued pursuant to the Acquisition is based on 180,409,726 VT Shares in issue as at 22 March 2010 (but excludes any Consideration Shares in respect of VT Shares to be issued under the VT Share Schemes).

6.   The combined order book value of approximately £10 billion is based on Interim Management Statements released by Babcock and VT on 2 February 2010 and 28 January 2010 respectively.

7.   The expected net debt to EBITDA ratio of approximately 2.9 times at the time of completion of the Acquisition is based on consensus analyst reporting for each of Babcock and VT, sourced from Bloomberg on 22 March 2010.

 


APPENDIX 3

1.         Directors

The following VT Directors have given irrevocable undertakings to vote in favour of the resolutions relating to the Acquisition at the Scheme Meeting and VT General Meeting in respect of their own beneficial holdings (or those VT Shares over which they have control) of VT Shares:

Name

Total Number of
VT Shares

Percentage of existing issued share capital

Michael Jeffries

50,000

0.028

Paul Lester

234,682

0.130

Chris Cundy

123,751

0.069

Philip Harrison

4,573

0.003

Andrew Given

3,000

0.002

David Barclay

10,000

0.006

Baroness Blackstone

6,942

0.004

Admiral the Lord Michael Boyce

3,200

0.002

Ian Tyler

Nil

Nil

 

APPENDIX 4

DEFINITIONS

The following definitions apply throughout this announcement unless the context otherwise requires:

"2006 Act"

the Companies Act 2006, as amended and for the time being in force

"Acquisition"

the recommended acquisition by Babcock of all the VT Shares to be effected by means of the Scheme or, should Babcock so elect, by means of an Offer, on the terms and subject to the conditions set out in the Scheme Document or, if applicable, the Offer Document

"Admission"

the admission of the New Babcock Shares by the FSA (in its capacity as the UK Listing Authority) to the Official List and to trading on the London Stock Exchange

"Alternative Offer"

(a)         an offer or possible offer by any third party for all or substantially all the issued share capital of VT;

 

(b)         the sale, or possible sale, of the whole or any material part of the assets or undertaking of the VT Group; or

 

(c)         any other transaction which would, if implemented, result in a change of control of VT;

 

in each case, howsoever it is proposed that such offer, proposal or transaction be implemented (whether, without limitation, by way of scheme of arrangement, merger, business combination, dual listed company structure or otherwise)

"Australia"

the Commonwealth of Australia and its dependant territories

"Authorisations"

authorisations, orders, grants, recognitions, confirmations, consents, licences, clearances, certificates, permissions or approvals

"Babcock"

Babcock International Group PLC, incorporated in England and Wales with registered number 02342138

"Babcock Circular"

the circular to be sent to Babcock Shareholders in connection with the Acquisition

"Babcock Board" or "Babcock Directors"

the board of directors of Babcock

"Babcock General Meeting"

the extraordinary general meeting of Babcock to be convened to consider, and if thought fit, approve the Babcock Resolution

"Babcock Group"

Babcock, its subsidiaries and subsidiary undertakings

"Babcock Resolution"

the ordinary resolution to be proposed at the Babcock General Meeting (and set out in the notice of general meeting to be contained in the Babcock Circular) to, among other matters, approve the Acquisition and authorise the Babcock Directors to allot the New Babcock Shares

"Babcock Share(s)"

the ordinary shares of 60 pence each in the capital of Babcock

"Babcock Shareholders"

holders of Babcock Shares

"Business Day"

a day (other than a Saturday, Sunday, public or bank holiday) on which banks are generally open for business in London

"Canada"

Canada, its provinces and territories and all areas subject to its jurisdiction or any political sub‑division thereof

"Capital Reduction"

the proposed reduction of VT's share capital in connection with the Scheme under section 648 of the 2006 Act, including the cancellation and the extinguishing of the Scheme Shares provided for by the Scheme

"CFIUS"

the Committee on Foreign Investment in the United States

"Closing Price"

the closing middle market price of a relevant share as derived from SEDOL on any particular day

"Combined Group"

with effect from the Effective Date, the combined Babcock Group and VT Group

"Conditions"

the conditions to the implementation of the Acquisition (including the Scheme), which are set out in Appendix 1 of this announcement

"Consideration Shares"

the new Babcock Shares to be issued and credited as fully paid to VT Shareholders pursuant to the Acquisition

"Court"

the High Court of Justice in England and Wales

"Court Orders"

the First Court Order and the Second Court Order

"Effective"

(i)          if the Acquisition is implemented by way of the Scheme, the Scheme having become effective pursuant to its terms; or

 

(ii)         if the Acquisition is implemented by way of an Offer, such Offer having been declared or become unconditional in all respects in accordance with the requirements of the Takeover Code

"Effective Date"

the date on which the Acquisition becomes Effective

"Evercore Partners"

Evercore Partners Limited

"Exon-Florio Amendment"

Section 721 of the Defense Production Act of 1950, 50 U.S.C. app. §2170, as amended, including the Foreign Investment and National Security Act of 2007, Pub. L. 110-49, 121 Stat.246.

"First Court Order"

the order of the Court sanctioning the Scheme under section 899 of the 2006 Act

"FSA"

the United Kingdom Financial Services Authority

"Implementation Agreement"

the implementation agreement entered into by Babcock and VT on 23 March 2010, governing the implementation of the Acquisition

"Japan"

Japan, its cities, prefectures, territories and possessions

 

"J.P. Morgan Cazenove"

J.P. Morgan plc

 

"Listing Rules"

the listing rules made by the FSA under section 73A of the Financial Services and Markets Act 2000

 

"London Stock Exchange"

the London Stock Exchange PLC or its successor

 

"LSE Admission Standards"

the rules issued by the London Stock Exchange in relation to the admission to trading of, and continuing requirements for, securities admitted to trading on the London Stock Exchange's market for listed securities

 

"Merrill Lynch"

Merrill Lynch International

 

"Mix and Match Facility"

the mix and match facility under which VT Shareholders (other than certain overseas shareholders) may elect, subject to equal and opposite elections made by other VT Shareholders, to vary the proportions in which they receive Consideration Shares and cash under the Acquisition

 

"MoD"

the UK's Ministry of Defence

 

"New Babcock Shares"

the Consideration Shares

 

"Offer"

a takeover offer as that term is defined in section 974 of the 2006 Act

 

"Offer Document"

should Babcock decide to implement the Acquisition by way of an Offer, the document which would be dispatched to VT Shareholders containing and setting out the terms and conditions of the Offer

 

"Official List"

the Official List of the UKLA

 

"OFT"

the UK's Office of Fair Trading

 

"Panel"

the Panel on Takeovers and Mergers

 

"pence" and "£"

the lawful currency of the United Kingdom

 

"Prospectus"

the prospectus relating to Babcock and the listing of the New Babcock Shares on the Official List (together with any supplements or amendments thereto)

 

"register"

the statutory register of members of Babcock or VT, as applicable

 

"Registrar of Companies"

the Registrar of Companies for England and Wales, within the meaning of the 2006 Act

 

"Regulation S"

Regulation S under the US Securities Act

 

"Regulatory Information Service"

one of the regulatory information services authorised by the UKLA to receive, process, and disseminate regulatory information from listed companies

 

"Reorganisation Record Time"

the time and date specified as such in the Scheme Document, expected to be 6.00 p.m. on the Business Day immediately preceding the Second Court Hearing

 

"Rothschild"

N M Rothschild & Sons Limited

 

"Scheme"

the proposed scheme of arrangement of VT under Part 26 of the 2006 Act to implement the Acquisition, with or subject to any modification, addition or condition thereto approved or imposed by the Court and agreed by Babcock and VT

 

"Scheme Document"

the document to be dispatched to VT Shareholders in relation to the Scheme including, amongst other things, the particulars required by section 897 of the 2006 Act and the notices of the Scheme Meeting and the VT General Meeting

 

"Scheme Meeting"

the meeting of the Scheme Shareholders to be convened by an order of the Court under section 896 of the 2006 Act to consider and, if thought fit, approve the Scheme (with or without amendment) and any adjournment thereof

 

"Scheme Shareholders"

the holders of the Scheme Shares

 

"Scheme Shares"

(a)         the VT Shares in issue at the date of the Scheme Document;

 

 

(b)         any VT Shares issued after the date of the Scheme Document but before the Scheme Voting Record Time; and

 

 

(c)         any VT Shares issued at or after the Scheme Voting Record Time but before the Reorganisation Record Time in respect of which the original or any subsequent holders thereof are, or shall have agreed in writing to be, bound by the Scheme,

 

 

in each case other than any VT Shares beneficially owned by Babcock or any subsidiary undertaking of Babcock

 

"Scheme Voting Record Time"

the time and date specified in the Scheme Document by reference to which entitlement to vote on the Scheme will be determined, expected to be 6.00 p.m. on the second day before the Scheme Meeting or, if the Scheme Meeting is adjourned, 6.00 p.m. on the second day before the date of such adjourned Scheme Meeting

 

"Second Court Hearing"

the hearing by the Court to confirm the Capital Reduction

 

"Second Court Order"

the order of the Court confirming the Capital Reduction

 

"SEDOL"

the Stock Exchange Daily Official List

 

"subsidiary", "subsidiary undertaking", "associated undertaking" and "undertaking"

shall be construed in accordance with the 2006 Act

 

"Takeover Code" or "Code"

the City Code on Takeover and Mergers

 

"UK" or "United Kingdom"

United Kingdom of Great Britain and Northern Ireland

 

"UK Listing Authority" or "UKLA"

the FSA in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000

 

"United States" or "US"

the United States of America (including the states of the United States and the District of Columbia), its possessions and territories and all areas subject to its jurisdiction

 

"US Securities Act"

the US Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder

 

"VT"

VT Group plc, incorporated in England and Wales with registered number 1915771

 

"VT Board" or "VT Directors"

the board of directors of VT

 

"VT General Meeting"

the general meeting of VT Shareholders to be convened to consider and, if thought fit, approve certain resolutions required to implement the Scheme (including any adjournment thereof)

 

"VT Group"

VT, its subsidiaries and subsidiary undertakings

 

"VT Shareholder(s)"

holders of VT Shares

 

"VT Share(s)"

the ordinary shares of 5 pence each in the capital of VT

 

"VT Share Schemes"

the VT Group Deferred Annual Bonus Scheme; the VT Group 2007 Performance Share Plan; the Vosper Thorneycroft Executive Share Option Plan 1996; the Vosper Thorneycroft Approved Executive Share Option Plan 1999; the VT Group Share Incentive Plan; the VT Group 2008 Sharesave Plan; the Vosper Thorneycroft Sharesave Scheme 1998 and the VT Group US Sharesave Plan

 

"Wider Babcock Group"

Babcock Group and associated undertakings and any other body corporate, partnership, joint venture or person in which Babcock and such undertakings (aggregating their interests) have an interest of more than 20 per cent. of the voting or equity capital or the equivalent

 

"Wider VT Group"

VT and associated undertakings and any other body corporate, partnership, joint venture or person in which VT and such undertakings (aggregating their interests) have an interest of more than 20 per cent. of the voting or equity capital or the equivalent

 

 

All times referred to are London time unless otherwise stated.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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