BAE bids for DML

BAE Systems, the UK?s biggest defence contractor, is poised to win control of the Devonport dockyard, home to Britain’s nuclear submarine fleet, after Babcock International appeared to draw back from making an offer. KBR, the US defence firm that controls Devonport, admitted publicly that it had received enquiries about its 51% stake in Devonport Management (DML).

BAE has been drawing up a bid that could value Devonport at up to £200m, and has been talking with Carlyle, the private equity firm that might provide some financing for the deal. Balfour Beatty and Weir Group, which own the rest of DML, are rumoured to be ?willing sellers? and both companies could net up to £50m each for their holdings.

It is thought that the Ministry of Defence (MoD) favours consolidating submarine manufacture, currently done by BAE at Barrow-in-Furness, with the refitting and refuelling carried out at Devonport.

DML’s potential sale comes at a time of upheaval in the UK’s naval yards, with defence procurement minister Lord Drayson demanding consolidation. BAE is negotiating to merge its shipbuilding interests with those of VT Group, and the future shape of the industry is not expected to become clear before the summer. Babcock, which owns the shipbuilding and refitting yard at Rosyth and runs the Faslane submarine base on the Clyde, says it wants to play a part in the consolidation and has argued that placing too much responsibility in the hands of BAE could be damaging to British interests.