|
General dynamics to buy uk defence rival { March 11 2004 } Original Source Link: (May no longer be active)
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381690171&p=1012571727088http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381690171&p=1012571727088
General Dynamics to buy UK defence rival
By Peter Spiegel
Published: March 11 2004 7:28 | Last Updated: March 11 2004 13:36
In a deal set to become one of the largest transtlantic defence mergers in recent history, General Dynamics, the US defence giant, is to acquire Alvis, manufacturer of the British army's fighting vehicles, for £309m ($554m).
Shares in the smaller UK group jumped nearly 40 per cent on news of the cash bid, which if consummated would be the most significant move by a US contractor into the UK defence market.
Alvis executives backed the bid, saying the deal would help bring GD’s size and technological know-how to the UK.
"General Dyamics has offered a price we feel fairly reflects the growth prospects of the company," Nick Prest, Alvis chairman, said in an interview.
According to GD and Alvis executives, GD has offered 280 pence per Alvis share, or about a one-third premium over Alvis’s closing share price on Wednesday. If all outstanding shares were bought, the deal would be valued at £309m.
In mid-morning trade in London, Alvis shares were 81-1/2p higher at 291-1/2p.
Arthur Veitch, head of GD’s combat systems division, said in an interview that his company was hoping to acquire at least a controlling interest of more than 50.1 per cent of outstanding shares. However, the offer will stand for all Alvis shares.
Alvis is 30 per cent owned by BAE Systems, Britain’s largest defence group, which acquired its stake last year. Mr Veitch said executives attempted to contact BAE officials late Wednesday to inform them of the pending deal, but those efforts were unsuccessful.
"BAE is a major shareholder of Alvis, and the offer will go to them at the same time it goes to other shareholders," said Mr Veitch.
In a statement on Thursday morning, BAE said it was "reviewing" its options in relation to its shareholding. Shares in the group were 4.7 per cent lower at 190p in mid afternoon trading in London.
Although relatively modest compared with the huge defence mergers that have occurred in the US over the last decade - and smaller than a buyout of BAE, which General Dynamics considered last year - the deal has tremendous symbolic importance. Alvis, which bought British rival Vickers two years ago, now makes almost all the British military’s land combat systems, including Challenger tanks and Warrior fighting vehicles.
Mr Prest, the Alvis chairman, said executives briefed UK ministry of defence officials Wednesday "as a matter of courtesy". Although the British government does not have a so-called "golden share" in Alvis, Mr Prest noted that public policy issues can be taken into account in the regulatory review of the deal.
"The industry we are in and General Dynamics are in has been consolidating," said Mr Prest. "Governments are increasingly looking for larger companies that are able to share technologies across borders."
Mr Veitch said there would be no lay-offs or management changes at Alvis as a result of the deal, saying the acquisition was part of a larger strategic plan by GD’s chief executive, Nicholas D. Chabraja, to broaden the company’s global presence. GD already has subsidiaries in Switzerland, Austria and Spain.
"The principle behind this deal is not cost savings," Mr Veitch said. "There is not an expectation by General Dynamics that we’re going to come in here and change Alvis from a cost standpoint or a management standpoint."
|
|
