BAE and VT agree on JV

BAE Systems and VT Group have provisionally agreed the ownership structure of their shipbuilding joint venture and are believed to have asked Sir John Parker, the chairman of National Grid Transco, to head the new company.

Industry sources say that the joint venture will be approximately 55% owned by BAE, with VT holding the remainder. However, the voting rights will be evenly shared, giving both companies an equal say in how the joint venture develops.

A merger of BAE and VT?s shipbuilding assets is being encouraged by the Ministry of Defence, which believes that a single national company will be better placed to win export orders. The Government is using a number of big Royal Navy orders, including six destroyers and two aircraft carriers, as leverage to encourage the merger. Lord Drayson, the Defence Procurement Minister, believes that it is better for BAE and VT to cooperate now when they are in a strong position after winning a number of large Royal Navy orders.

The Government is concerned that once it finishes commissioning the next generation of Royal Navy ships, there will be few domestic contracts for a couple of decades. BAE and VT will have to win export orders if the 4,000 people employed by the two companies are to remain in the industry. Once the BAE and VT assets are merged, the new company will effectively be the UK?s only major shipbuilder.

The new company will include VT?s Portsmouth facility, BAE?s docks at Govan and Scotstoun on the Clyde and an existing maintenance joint venture called Fleet Services.

The other BAE-VT joint venture called Flagship, which trains Royal Navy personnel, will not be included.