Babcock seals buy-out of Devonport

Babcock International yesterday pulled off a golden deal to buy Devonport dockyard for £350 million and become the biggest supplier of services to the Royal Navy. The company, which runs the Faslane submarine base and Rosyth naval dockyard, said there would be significant strategic and financial synergies, but gave no hint on how they might impact upon its Scottish sites.

Devonport, the Plymouth naval base in Devon, is the largest marine support complex in Western Europe, with 11 dry docks, five outfitting basins and three miles of deepwater berths. Babcock employs 1,200 staff at Rosyth, 1,100 at Faslane, as well as 2,000 at First Engineering in Glasgow.

After Babcock outbid the Carlyle private equity group and outmanoeuvred larger rival BAE Systems, chief executive Peter Rogers said the acquisition would be “substantially earnings enhancing in our first year of ownership”, driving the shares up by more than 11%. The deal came after BAE pulled out of the bidding having failed to agree a partnership deal with either Babcock or Carlyle, under pressure from the Ministry of Defence, which wants consolidation in the sector but not BAE dominance.

The deal also lands a £50m windfall profit for Weir Group, one of Devonport’s three owners along with Halliburton subsidiary KBR and Balfour Beatty, thanks to a 24.5% stake picked up by Weir under its former chief executive, Ron Garrick.

Babcock last month signed a groundbreaking deal with Petrofac to enable Rosyth employees to be retrained and transferred for North Sea oil work when dockyard orders permit.