Babcock confirms it turned down Serco's buyout offer

Credit: REUTERS/DARREN STAPLES

British engineering services group Babcock International Group Plc on Monday confirmed that it had rejected an offer by rival Serco Group in January to combine the two companies in a deal that would have created a company worth 4 billion pounds ($5 billion)

Adds details, share movement

June 17 (Reuters) - British engineering services group Babcock International Group Plc BAB.L on Monday confirmed that it had rejected an offer by rival Serco Group SRP.L in January to combine the two companies in a deal that would have created a company worth 4 billion pounds ($5 billion)

Babcock said that on 23 January it received an unsolicited and preliminary proposal from Serco regarding a potential all-share deal. No further proposal had been received, it added.

"A combination of the two companies had no strategic merit and was not in the best interests of Babcock's shareholders, customers or wider stakeholders," the company said in a statement.

The company's shares were up 4.4% at 485 pence of 0750 GMT, trimming its losses to just about 1% so far this year. They were worth as much as 8 pounds last July before a series of setbacks.

Contractors such as Babcock, whose biggest customer is Britain's Defence Ministry, have been hit by a slowdown in decision-making because ahead of Brexit. The collapse of contractors Carillion and Interserve has prompted many companies to rethink strategy.

Serco, which provides services across defence, security, health and transport, has focused on winning public business abroad and cutting costs to weather a slowdown in UK outsourcing. It is led by Rupert Soames, a grandson of wartime prime minister Winston Churchill.

Babcock has also been cutting costs to offset difficult operating conditions but questions over management and strategy have plagued it.

Babcock remains the larger of the two companies, with a market valuation of around 2.4 billion pounds. Serco, whose shares, slipped 0.4 percent on Monday to 135.5 pence, is valued at just under 1.7 billion pounds.

Serco's approach was first reported by The Sunday Times.

($1 = 0.7943 pounds)

(Reporting by Pushkala Aripaka in Bengaluru Editing by Bernard Orr/Keith Weir)

((Pushkala.A@thomsonreuters.com; within UK: +44 20 7542 1810, outside UK: +91 80 6749 6633 ; Reuters Messaging: Pushkala.A.thomsonreuters.com@reuters.net; Twitter: @pushkala_a))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More