BAE pulls back from tanks bid

By TOM MCGHIE
Updated:

 

BAE Systems has ruled out making a counterbid for Challenger tank company Alvis after American rival General Dynamics swooped with an agreed £309 million bid.

The British defence giant, which has a 29.9% stake in Alvis, says it plans to work with General Dynamics on projects and is prepared to support its American rival if an alternative bid by a foreign company emerged.

French defence group Thales and Germany's Rheinmetall are believed to be considering higher offers for Alvis.

BAE sources dismissed suggestions that as the largest shareholder in Alvis, it was angry that the Americans had not consulted it before making their move.

Formally, BAE has told the Stock Exchange that it is considering all options, which include bidding for the company, maintaining its stake or selling the share.

But BAE bought its holding in Alvis only last year so that it could work with it to develop a new range of lightweight armoured vehicles.

The Ministry of Defence is consideringa £3 billion contract to develop such a vehicle and BAE would be in a good position to profit because Alvis is the favourite to win the deal.

BAE Systems knows General Dynamics well. The companies have worked on several projects, including laser-guided rockets, and the Americans are helping BAE solve the problem of soaring costs in its Astute nuclear submarine programme.

Last year, BAE failed in an attempted merger with General Dynamics.

Shares in Alvis closed at 297p on Friday, valuing the company at £328 million and indicating that investors are expecting a higher bid.

Amicus, the union representing hundreds of Alvis workers, is concerned about the potential impact on jobs.

John Wall, Amicus national officer for defence, said: 'We have real concerns on the industrial and political fronts about the takeover of the UK's armoured vehicle sector by a foreign corporation.'

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