Ministry Urges VT Group and BAE to Merge
Wednesday, November 15, 2006
VT Group is under pressure from the Ministry of Defense to agree to the framework of a deal to merge its shipbuilding assets with BAE Systems by Christmas.
VT and BAE are in discussions to consolidate what remains of the British shipbuilding industry. An initial attempt to merge the assets at the start of this year failed when Babcock, the engineering company, demanded too high a price for its ship-repair facilities. Under pressure from the MoD, VT and BAE have begun talks again. Babcock is not involved this time, but Paul Lester, chief executive of VT, said yesterday that the merged shipbuilder, dubbed Shipco, eventually could buy Babcock’s facility at Rosyth, Fife.
Several options are being discussed by BAE, which has yards in Scotstoun and Govan, Scotland, and VT, which owns Portsmouth shipyard. BAE could buy out VT; the two could create an alliance but continue to operate as separate entities; or they could form a joint venture spun out of the parent companies.