Merger of BAE and VT still in dry dock
David Robertson, Business Correspondent
The £1 billion merger of BAE Systems and VT Group’s shipbuilding assets has become a victim of politics and is likely to be delayed by several months, The Times has learnt.
The creation of a single UK shipbuilder is being tied to an order by the Ministry of Defence (MoD) for two aircraft carriers, each worth about £2 billion. The MoD had hoped to announce both deals last week but BAE and VT had not completed negotiations on the merger.
Having missed that deadline, the announcement likely will have to wait until at least mid-May because of domestic politics. The House of Commons is in recess for Easter and then the Government goes into “purdah” until after the local and Scottish elections on May 3. Before the elections the Government is barred from making announcements that could be perceived as generating political advantage.
Sources close to the Government have said that the carrier launch may be delayed until June or July to allow Gordon Brown to make the announcement as Prime Minister. Assuming that he succeeds Tony Blair, he is expected to start his tenure at 10 Downing Street with a string of high-profile announcements. The warships, to be commissioned HMS Queen Elizabeth II and HMS Prince of Wales, will become the flagships around which the Royal Navy will be built, and Mr Brown may regard this as sufficiently important.
BAE and VT could, theoretically, announce their merger to the Stock Exchange when they complete the contract, but the MoD is understood to want to link the merger with the announcement about the carriers.
The MoD advocates a single shipbuilder because it is concerned that once the present round of Royal Navy orders ends there will be few military orders for many years. This would force British yards to seek export orders overseas, and the Government believes that a single shipyard is better placed to deal with this circumstance.
BAE and VT have been head-to-head competitors. The merged entity will include VT’s yard at Portsmouth and those of BAE at Scotstoun and Govan. It will take in a joint venture between the companies, called Fleet Support, which provides maintanance facilities. BAE is expected to own 55 per cent of the venture and VT the balance.
Trinidad deal
VT Group has won a £155 million contract from Trinidad and Tobago to supply three offshore patrol vessels, it emerged last night. The deal, signed yesterday in Port of Spain, is the largest military contract by Trinidad and is the latest success for VT this year, after a £450 million order for a consignment of patrol vessels to Oman in January.
