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2 Aug 02. Alvis Plc said on Friday it was buying Rolls-Royce Plc’s Vickers Defence business, maker of the Challenger tank, for £16.2m ($25.2m) to give it more clout in Europe’s armoured vehicle market.

The deal includes Vickers Defence Systems and Vickers Bridging, both based in the UK, and a 75 percent stake in Vickers OMC, based in South Africa. The acquisition will make Alvis the top armoured vehicle manufacturer in the UK and Nordic Europe and one of Europe’s top three, Chairman Nick Prest said.

The addition of the Challenger tank line, heavy vehicles weighing about 30 tonnes, also will augment Alvis’ collection of light to medium vehicles, Prest said.

Vickers order book amounts to £253m , including an order for Engineer Tank Systems for the UK Ministry of Defence valued at £218m.

“There is a continuing business around Challenger II which has a financial price
to us. We don’t say that is the end of the market where we want to be
strategically, but it has a continuing value,” Prest said.

There will be some job losses at Vickers, which will probably come after the deal is completed in September, Prest said. The division employs about 1,300 people.

The long-anticipated purchase, which will add to Alvis’s earnings in 2004, comes after its acquisition of Sweden’s Hagglunds Vehicle in 1997 and the UK’s GKN Defence in 1998.

Vickers will also bring with it engineering and software expertise that will augment Alvis’ operations. The move, which still needs regulatory approval, was welcomed in the UK’s defence ministry.

“I commend the initiative taken by both companies to secure a potential
agreement,” Sir Robert Walmsley, chief of defence procurement, said. “Each company separately supplies important equipment to the UK Ministry of Defence and I welcome any step which enhances their ability to continue to do so.”

BATTLESPACE UPDATE reported in February that Alvis was in talks with Rolls to buy Vickers and that the deal would be valued at less than £20m.

Comment: This deal gives Alvis the critical mass it needs in the market place to remain a major player in the world armoured vehicle market. There still remains the question what GKN will do with its 29.9% stake which will prove pivotal to whether Alvis remains a separate entity or whether GKN will now decide to take a profit and sell to a buyer such as GD or United Defense.

The new Alvis will see job losses as reported at Vickers and we shall see where the main base will be located. The Telford plant is still owned by GKN Plc and we may see a moo the Vickers plant in Newcastle. Alvis has the potential to win substantial orders with the Vickers segment FCLV, where the combined team offering may prove irresistible to the UK MoD against the INSYS/ACMAT Team, MRAV where a minimum order of 300 is expected, a possible interim buy of Piranha IV vehicles for the UK (The new entity has a licence for the entire Piranha range), FRES, where Hägglunds is expected to lead, Challenger 2 support and a number of overseas possibilities in South Africa and Belgium.

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