BAE to pull out of Babcock bid

BAE Systems in the UK is believed to be preparing to walk away from a £700m bid for engineering group Babcock. BAE’s interest in the company was fading because of the soaring price of Babcock shares, which have leapt from under 260p to 320p in recent weeks and a strong set of results from Babcock later this week could send its share price even higher. Analysts expect Babcock to bank annual pre-tax profits of around £41.5m this week.

Last month, BAE and VT Group confirmed they were considering a joint bid for Babcock which would have reshaped Britain’s naval shipbuilding industry. BAE owns yards in Glasgow and Barrow, VT owns Portsmouth and Babcock has sites in Scotland, including Rosyth and Faslane, where the Royal Navy’s nuclear submarine fleet is maintained.

Thales, the French defence group, Carlyle, the American private-equity firm, and Serco, one of Britain’s largest support-services companies, are thought to be considering their options in the wake of interest in the company.