BAE scuppers shipyard sale

BAE Systems now appears unlikely to sell its shipyards after the company’s surprising cash bid for Alvis, Britain’s last independent tank maker. Sources close to Britain’s biggest defence contractor said the sale of the shipbuilding business, i.e. two yards at Govan and Scotstoun in Glasgow and one at Barrow-in-Furness, was now off the agenda.

The most obvious buyer for the yards was VT Group, which owns Southampton dockyard. VT said yesterday that it is still waiting for an information memorandum from BAE, which is due at the end of this month. However, analysts suspect that BAE had already put off VT because it was only offering for sale the yards themselves and not the support services contracts which attracted VT in the first place.

BAE’s bid for Alvis, which was announced on Thursday evening, trumped General Dynamics’ offer and surprised many analysts who had been led to believe that BAE had no intention of trying to beat General Dynamics. On the day BAE made the announcement, General Dynamics disclosed that only 21.6% of Alvis’s investors had accepted its offer. The final deadline for acceptances of General Dynamics’ offer, which will not be increased, is 1pm on Monday.

BAE’s bid, which will need to be approved by the Government and the European Union, appears to have been opportunistic.