VT Group Disposal of Shareholding, BVT Surface Fleet

Friday, September 25, 2009

Support services company VT Group plc announced that it has signed a legally binding agreement with BAE Systems plc on the disposal of its 45 percent shareholding in BVT Surface Fleet Limited, the shipbuilding and naval support joint venture between BAE and VT, for cash consideration of $551.9m.

In accordance with the joint venture agreement signed by VT and BAE on 11 June 2008 in relation to BVT, this cash consideration corresponds to the minimum exercise price of VT’s Put Option of $606.1m plus approximately $.9m of notional interest and net of deductions of $19.4m in respect of pensions liabilities, $35.1m in respect of dividend repayments and $.3m in respect of notional interest on funding provided by BAE Systems to BVT.

Further to previous announcements regarding negotiations with BAE in relation to the performance of certain export contracts, VT has also agreed to inject $68.6m of capital into BVT on completion of the Transaction.

In aggregate, therefore, the cash proceeds to be received by VT on the disposal of its shareholding in BVT will be $483.4m. In addition, VT will, at completion, settle $7.4m of ordinary course intercompany balances with BVT.

On the disposal of its shareholding in BVT and pursuant to the terms of the agreement signed by VT and BAE on 11 June 2008 in relation to VT’s acquisition of BAE’s 50 per cent. shareholding in Flagship Training Limited, VT will separately pay $111.9m to BAE in respect of deferred consideration and accrued interest. BAE has agreed to waive its right to be paid and VT has agreed to waive its right to be repaid £10 million under the Flagship Acquisition Agreement, which payment or repayment was dependant on the future performance of the Flagship business.

The disposal of its shareholding in BVT will result in VT becoming a pure support services business and the Board of Directors of VT believe that this new focus will provide for a more stable business with greater long term visibility and better prospects for growth. Furthermore, the proceeds from the Transaction will provide greater financial flexibility to take advantage of opportunities, both organic and acquisitive, to grow VT’s support services offering to existing customers and add new capabilities.

The Transaction is conditional on, inter alia, the approval of VT’s shareholders and the obtaining by BAE of EU anti-trust approval. Approval of the US regulatory authorities and the UK Ministry of Defence has already been received.

The approval of the Transaction by VT's shareholders is to be sought at a General Meeting in October 2009. The Board will unanimously recommend shareholders to vote in favour of the Transaction, as the Directors intend to do so in respect of their own shares. A circular with full details on the Transaction will be sent to VT's shareholders as soon as possible and the Transaction is expected to complete by the end of October 2009.

(www.vtplc.com)