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22 Aug 03. BAE SYSTEMS plc agreed to purchase 31,882,534 shares, representing approximately 29% of the issued share capital, in Alvis plc (&Alvis8) from GKN plc for £73 million in cash (equivalent to 230p per Alvis share).

Alvis has operations in the UK, Scandinavia and South Africa. Its vehicles= combine advanced software and electronic systems with leading-edge vehicle, weapon and protection technology.

Nick Prest, Chairman and Chief Executive of Alvis plc commented: “We welcome BAE Systems as a major shareholder in Alvis. BAE Systems has complementary skills to those of Alvis in Land Systems. We look forward to developing a relationship to the benefit of the company and all its shareholders.”

Commenting on the transaction, Mike Turner, Chief Executive of BAE SYSTEMS, said: “Alvis is an excellent company. We believe that this investment will result in new opportunities to work together, in a combination that is good for UK Land Systems capability, and will further enhance Alvis’s strong growth potential.”

Completion of the acquisition remains conditional upon BAE SYSTEMS receiving regulatory clearance in Germany.

BAE Systems PLC isn’t currently interested in making an offer to buy the rest of Alvis, a company spokesman said Friday. He added that BAE would review this stance if another party made an offer for Alvis.

“It’s an investment in a company that we believe has a good track record for innovation in its field,” the spokesman said. The acquisition will deepen the current cooperation between the companies, he said. Alvis is the only U.K. maker of armoured vehicles and BAE already supplies it with systems such as electronics.

Comment: FRES is key to BAE’s Future Systems strategy after the company lost out in other major C4I contracts such as Watchkeeper and BOWMAN. Following the cancellation of the original ‘sole source’ FRES option by which BAE and Alvis would carve up the contract under a ‘contract of national importance’ basis, BASE was looking vulnerable following reports that United Defense had been sounded out in taking GKN’s stake in Alvis after General Dynamics declined. Alvis had been confident of priming the FRES requirement as reported in our AUSA BATTLESPACE UPDATE issue last year. But there was always the problem of under capitalisation of Alvis and awarding a programme of such complexity to a company with limited systems integration capability. BAE had always sold its self as the Lead Systems Integrator (LSI) for FRES using support from General Dynamics (UK) Ltd’s BOWMAN capability. However Treasury pressure to open the contract to competition in July forced BAE’s hand to purchase the GKN stake at top value to keep its stake in FRES. The sale by GKN marks the company’s exit from armoured vehicle manufacture, which it has been involved in some form or other since the First World War manufacturing such vehicles as FV432, Warrior, Saxon and Tactica.

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