VT Group rejects approach from Babcock International as it tries to close Mouchel bid

Newly refocused support service company, the VT Group (LSE: VTG) (‘VT’) confirmed it has made a final equity based offer for the Mouchel Group (LSE: MCHL), valued at 305p per share. The protracted negotiations between the two parties may be further complicated however by confirmation from Babcock International (LSE: BAB) that it too has made an unsuccessful approach, to acquire VT Group in a deal worth 633.9p.

VT’s final offer to Mouchel was made on the 12th February, consisting of 0.579 new VT shares per Mouchel share, plus a 50% cash alternative. This latest takeover attempt follows VT’s initial approach back in December, when two separate offers which reached 260p were rejected by Mouchel’s board in quick succession. VT said that the proposed transaction would be significantly earnings enhancing and value creating during the first full year, driven by natural cost synergies resulting from the business combination. Mouchel said it is considering the terms of the proposal and it is consulting with its principal shareholders.

Latter this afternoon it has emerged that Babcock recently approached VT with its own take-over attempt as the hunter became the hunted. The Babcock offer values VT at 633.9p per share, comprising 245.5p in cash and 0.701 Babcock shares per VT share held. According to Babcock the combination has significant industrial and commercial logic and would bring together two highly complementary businesses. VT’s Board rejected this proposal and has declined to enter into discussions with Babcock.

The former shipbuilder, VT, believes the Mouchel transaction will create significant value for both Mouchel and VT shareholders. Furthermore the company said the enlarged group will benefit from materially increased revenue opportunities as the combined capabilities and customer bases of the two businesses will provide greater access to larger, more complex contract opportunities.

Accordingly the transaction will provide the enlarged group, with access to a wider range of customers in central and local government and regulated industries. VT particularly identified the period following the up-coming general election, as need for Government cost efficiencies will drive growth opportunities among outsourcers.

Following a ruling by the takeover and mergers panel on the 22nd January, VT had until 8th March to make their final proposal. VT said it is looking to enter into constructive discussions with Mouchel on the basis of the Final Proposal.
The primarily equity-based deal values Mouchel at 305p per share, based on VT’s month average share price of 527 pence. The company also noted that the offer includes Mouchel's interim dividend and as such the valuation is subject to Mouchel not paying a dividend for the six months ended January 31st 2010.

The newly re-classified support service group is understood to have a substantial acquisition war chest following the £346 million sale of its last shipbuilding assets to BAE Systems (LSE: BA) in September 2009.  http://www.proactiveinvestors.co.uk/companies/news/13331/vt-group-rejects-approach-from-babcock-international-as-it-tries-to-close-mouchel-bid-13331.html