VT rejects new offer from Babcock

VT Group has rejected a new offer from Babcock International as the takeover battle between the two UK engineering firms intensifies . Babcock raised its original indicative offer to as much as £1.29bn in cash and shares. Like the first approach of £1.14bn, this proposal has been unanimously rejected. "The revised proposal, which was between 680p and 715p per VT share, again funded through 0.701 new Babcock shares plus cash, was only a small improvement on Babcock's previous indicative offer and continued to significantly undervalue VT and its prospects," VT said. Shares in VT jumped 4.5% to 650p this morning, adding to the 25% rise seen since Monday when Babcock's approach was made public. VT reiterated that, in its view, merging two of Britain largest support services firms makes little sense for its shareholders. It pointed out that Babcock is already significantly leveraged and faces pension liabilities of £2bn, and argued that its rival will suffer more if the UK cuts back on defence spending after the election. VT also disputed Babcock's claim that a deal would boost profitability through efficiency savings, arguing that the Ministry of Defence will probably insist on sharing the benefits by paying less. VT also points out that the cash element of Babcock's offer largely comes from the sale of its own BVT shipbuilding arm. VT, which was once a major shipbuilder, now also provides a range of public services to government and local authorities .