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BAE +VT +CVF +DML –KBR (+BAB) = BAE = Shipco + Subco

BAE +VT +CVF +DML –KBR (+BAB) = BAE = Shipco + Subco or Shipco – Subco or DML +GD +BAE = Subco +THS +DCN?
By Julian Nettlefold, Editor BATTLESPACE

16 Nov 06. In the continuing courtship regarding the future of the U.K.’s naval shipyards, unravelling this courtship is as complex as the statements put out by the various players whose evasiveness as to the real goals is evident by the text. Thus is the matrix above is a possible solution?!

In a busy week that has seen BAE replace Ian King as CEO and give Steve Mogford take on the complicated task of pushing through consolidation of the British naval shipbuilding industry, a key demand of the MoD. Had BAE not got its way in controlling shipbuilding as it has with Land Systems and Air Systems as the DIS suggested? Perhaps this explains Steve Mogford’s sideways move?

The CVF bid was believed to have been submitted to the IAB this week at a price of £3.9bn taking it below the required £4bn level at a time when it was suggested earlier in the year that the real costs would be over £6bn if Support is included. Sources also suggest that the MoD is looking a re-opening Portland Naval Base to base the two ships in preference to Portsmouth. But with no money allocated there is a long way to go before the contract is signed.

Is Lord Drayson’s visit to France this week the key to this contract value? Is the £3.9bn the U.K.’s share of CVF and will France enter the Requirement to build the second carrier as we have often suggested or will the U.K. build two and France the third?

The IAB submission comes at a sensitive time for Shipco., Lord Drayson’s desire to see the amalgamation of the naval shipyards into one unit by December. VT results above reflect the Company’s lack of growth and with Babcock now on a higher rating than VT, will VT bite the bullet and sell out to BAE? But, with CVF in the balance, will BAE want to take VT’s shipbuilding business and be left holding the baby if CVF is cancelled? The City also has a problem that it cannot effectively value the two businesses until full details of the CVF contract are notified and the contract signed.

It has been known for some time that BAE has coveted the ownership of DML as it would effectively give control of the U.K.’s submarine business to Subco. the joint BAE-Rolls Company.

The impending floatation of KBR the majority owner of DML has caused alarm bells to ring in the MoD given the yard’s strategic importance and the Government’s Golden Share. The MOD was recently made aware of the proposed separation of KBR by its parent Halliburton, starting with an Initial Public Offering (IPO) of 17-19% of KBR. This has triggered a legally binding process permitting MOD to test whether the proposed separation alters the balance of risk associated with the management of the MOD’s strategic asset at Devonport. This process was established with the sale of the dockyard in Devonport in 1997. The MOD is undertaking a risk analysis and will use the output of this to inform its opinion of the proposed separation. This analysis will complete before the end of November 06 but relies on BR/Halliburton support and engagement, which has been promised.

The FT reported that on Tuesday the U.K. Britain made a last-minute demand that Halliburton, the US oil services group, withdraw the imminent flotation of its KBR subsidiary or face being stripped of its ownership of the Devonport naval dockyard. As reported in the Financial Times last week, Lord Drayson, the British defence procurement minister, has been seeking urgent guarantees from Halliburton about the future financial viability of KBR before giving his support to the float.

However, the FT reported today that Halliburton will launch today the flotation of its KBR subsidiary after ignoring an 11th-hour demand from the British government to postpone the initial public offering. The UK’s Ministry of Defence wanted the float delayed to give it time to determine the financial viabi

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