VT Group plc announces it has reached agreement on the disposal of its shareholding in BVT Surface Fleet Ltd

VT Group plc announces it has reached agreement on the disposal of its shareholding in BVT Surface Fleet Ltd
September 24, 2009

Support services company VT Group plc (“VT”) today announces that it has signed a legally binding agreement with BAE Systems plc (“BAE”) on the disposal of its 45 per cent. shareholding in BVT Surface Fleet Limited (“BVT” or the “JV”), the shipbuilding and naval support joint venture between BAE and VT, for cash consideration of £346 million (the “Transaction”).

In accordance with the joint venture agreement signed by VT and BAE on 11 June 2008 in relation to BVT (the “JV Agreement”), this cash consideration corresponds to the minimum exercise price of VT’s Put Option of £380 million plus approximately £0.6 million of notional interest and net of deductions of £12.2 million in respect of pensions liabilities, £22 million in respect of dividend repayments and £0.2 million in respect of notional interest on funding provided by BAE Systems to BVT.

Further to previous announcements regarding negotiations with BAE in relation to the performance of certain export contracts, VT has also agreed to inject £43 million of capital into BVT on completion of the Transaction.

In aggregate, therefore, the cash proceeds to be received by VT on the disposal of its shareholding in BVT will be £303 million.
In addition, VT will, at completion, settle £4.7m of ordinary course inter company balances with BVT.

On the disposal of its shareholding in BVT and pursuant to the terms of the agreement signed by VT and BAE on 11 June 2008 in relation to VT’s acquisition of BAE’s 50 per cent. shareholding in Flagship Training Limited (the “Flagship Acquisition Agreement”), VT will separately pay £70.2 million (comprising £65 million of deferred consideration and £5.2 million of notional interest, held currently as debt) to BAE in respect of deferred consideration and accrued interest. BAE has agreed to waive its right to be paid and VT has agreed to waive its right to be repaid £10 million under the Flagship Acquisition Agreement, which payment or repayment was dependant on the future performance of the Flagship business.

The disposal of its shareholding in BVT will result in VT becoming a pure support services business and the Board of Directors of VT (the “Board”) believe that this new focus will provide for a more stable business with greater long term visibility and better prospects for growth. Furthermore, the proceeds from the Transaction will provide greater financial flexibility to take advantage of opportunities, both organic and acquisitive, to grow VT’s support services offering to existing customers and add new capabilities.
The Transaction is conditional on, inter alia, the approval of VT’s shareholders and the obtaining by BAE of EU anti-trust approval. Approval of the US regulatory authorities and the UK Ministry of Defence has already been received.
The approval of the Transaction by VT's shareholders is to be sought at a General Meeting in October 2009. The Board will unanimously recommend shareholders to vote in favour of the Transaction, as the Directors intend to do so in respect of their own shares. A circular with full details on the Transaction will be sent to VT's shareholders as soon as possible and the Transaction is expected to complete by the end of October 2009.

Paul Lester said: "This completes the final step of our exit from our shipbuilding and related activities. It will leave us in a strong financial position with net cash on our balance sheet and positions us to continue to pursue a growth strategy focusing exclusively on support services."

Notes
BVT is the UK’s leading provider of surface warships and through-life support, an industrial partner for the UK Ministry of Defence and a leader in the global export market for warships and naval surface ship support. With operations in Glasgow, Portsmouth and Filton near Bristol, it employs over 7,000 people.
Based on the VT share of results of BVT incorporated in the annual report and accounts of VT for the financial year ended 31 March 2009, BVT generated revenues of £439.5 million and a loss before tax of £19.7 million for the 9 months ended 31 March 2009 and had gross assets of £413.4 million (before adjusting for assets related to the T-45 contract).

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