14 Jan 07. BAE Systems has joined forces with Carlyle, the US private equity group, to launch a bid for the UK’s nuclear submarine industry. Carlyle and BAE plan to bid jointly for the Devonport dockyard, the Plymouth naval yard that maintains, upgrades and fuels the Royal Navy’s submarines. Defence experts say the asset is hard to value but could fetch up to £200m. If the joint offer succeeds, the duo would be in pole position to profit from the £25bn plan to construct a new fleet of subs. The deal could also lead to the creation of a “super contractor” that would construct and manage all of the Navy’s warships. Devonport is currently owned by a consortium of KBR, the US firm recently spun out from Halliburton, Balfour Beatty and Weir Group. KBR, which owns a 51 per cent stake in the yard, has appointed UBS, the Swiss investment bank, to handle the sale. BAE, which is led by Mike Turner, already owns the yard at Barrow in Furness, Britain’s only submarine building facility, where the Trident fleet was built. Working the two facilities in harness could deliver substantial savings and make the approach highly attractive for the Ministry of Defence. Carlyle has a long track record of large defence contracts. The group, which has in the past employed political heavyweights such as Sir John Major, George Bush senior and James Baker, has a stake in Qinetiq, the MoD’s defence laboratories business, which floated last year. The Government came under fire for the large profits Carlyle made in the flotation. Last night the private equity house declined to comment on the bid, but a spokesman for the defence contractor said: “BAE Systems is fully supportive of the UK Government’s aims, underlined in the Defence Industrial Strategy, to achieve maritime consolidation. “We are talking to a number of parties in the submarine sector. Combining front-end design and build capabilities with through-life support in the submarine sector is fully in line with the Government’s aspirations.” Defence analysts believe BAE and Carlyle would face a rival bid from Babcock International, the support services group that owns the Rosyth naval dockyard and the submarine base at Faslane. It is understood that Babcock is monitoring events closely but has not entered the fray. (Source: Daily Telegraph)
Comment: It is likely that Carlyle will be involved in buying out the DML minority stakes of Weir Group and Balfour Beatty. This would appear to scupper Babcock’s bid to join the party. (See BATTLESPACE UPDATE Vol.8 ISSUE 51, 19 December 2006, IS BABCOCK GOING TO RAIN ON BAE’S PARADE?)
17 Jan 07. Standard & Poor’s kept EADS (FR:005730 : eads) on Credit Watch with negative implications, following the profit warning on Wednesday on its Airbus division. The weakening financial performance could cause EADS’ credit profile to deteriorate further than it had previously anticipated, the rating service said, because announced charges include an unknown level of costs brought forward from future years and could also include additional A380 charges not originally envisaged.
12 Jan 07. Canon Inc. said on Friday it will buy out Toshiba Corp. in their flat-panel display venture to resolve a patent dispute with Nano-Proprietary Inc. in the United States. Canon will now own the unit that was set up in 2004 to develop a new type of thin panels that can be used in TVs to challenge consumer electronics giants such as Samsung Electronics and Matsushita Electric Industrial Co. Ltd. The move is aimed at appeasing Texas-based Nano-Proprietary, which filed a lawsuit claiming that its 1999 agreement to license technology to Canon did not extend to Toshiba. Toshiba has a 50 percent stake in the joint venture, called SED Ltd. (Source: Reuters)
14 Jan 07. The chairmen of Volkswagen, Investor and MAN will meet this week to begin “friendly and constructive” negotiations about a merger of MAN and rival truckmaker Scania. The breakthrough follows months of escalating tension betw