Babcock to lose staff in cost cuts after VT takeover

Babcock International today claimed it would shave £8 million a year off its costs by axing IT and management staff after it spent £1.32 billion on defence services firm VT Group.

VT capitulated to a third approach from Babcock, which maintains Royal Navy submarines. The firm offered 361.6p in cash plus 0.701 Babcock shares for each VT one.

If VT — the former shipbuilder Vosper Thornycroft — changes its mind it will have to pay Babcock a £13 million break fee. Its suitor would have to pay £12 million for withdrawing the deal.

VT last month rejected Babcock's earlier 634p bid as "strategically unsound", but today said the offer was "fair and reasonable".

The offer will be put to VT's investors, who would own 36% of the combined company.

At fee rates of about 1%, VT's advisers Rothschild and Merrill Lynch will scoop about £13 million, with similar fees for Babcock's advisers JPMorgan and Evercore.

The combined business is expected to be big enough to enter the FTSE 100 index.