Naval Shipyards Merger Signaled
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Naval Shipyards Merger Signaled


Britain's naval shipyards are coming under increasing political pressure to merge their operations by January 2005 to create a new national shipbuilding champion. The merger of the warship-building and fitting businesses of BAE Systems, VT (the former Vosper Thornycroft) and Babcock would safeguard 20,000 jobs in a deal in which, it is hoped, the Ministry of Defence will guarantee work as far down the line as 2020. It is thought that high-level, detailed planning meetings between MoD officials and senior company executives are taking place on a weekly basis with an agenda of sealing a deal between the three companies within two months.

The proposed structure would be a standalone joint venture in which each of the parties would hold a stake, probably dominated by BAE Systems' larger but unprofitable shipbuilding operations. As it stands, after the construction of the Type 45 destroyers and the 2bn aircraft carriers on which the companies are working, the naval shipbuilding pipeline could start to dry up from 2011. The companies want a flattening-out of the workload, including new vessels for the auxiliary fleet, taking the orders pipeline out to at least 2020. A central sticking point for a new national shipbuilding champion is just who will own what. By annual revenues from its shipyards on the Clyde, BAE Systems could lay claim to a 60% economic share of a merged entity. That is likely to be challenged by VT, which has shown its commitment to the industry by investing in and moving to state-of-the-art operations at Portsmouth. BAE has made little secret that it wants to exit its loss making shipbuilding interests. The ship refurbishment operations of Babcock at Rosyth would also see it lay claims to a large stake in the entity.

Evening Standard, 12 November 2004 - This is Money  

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