Alvis has conditionally agreed with Rolls-Royce to acquire the business interests of Vickers Defence, comprising Vickers Defence Systems and Vickers Bridging, both based in the UK, and a 75 per cent. stake in Vickers OMC, based in South Africa.
The consideration for the transaction on a debt-free basis will be £16.2m, to be funded from Alvis's existing cash resources and bank facilities.
Vickers Defence is a leading supplier of integrated high technology land defense systems. Products and services include the Challenger II Main Battle Tank, a range of other armored vehicles and sub-systems, training and simulation, logistics support, proof and experimental ranges and military bridging.
Vickers Defence's order book amounts to £253m, including an order for Engineer Tank Systems for the UK MoD with an outstanding value of £218m.
The operations of Vickers Defence Systems will be merged with those of Alvis's existing UK armored vehicle company, Alvis Vehicles Ltd, in a combined UK business. Vickers Bridging and Vickers OMC will continue as self-standing businesses.
The transaction is expected to bring considerable advantages:
++Combining the complementary technical expertise of Vickers Defence Systems with Alvis Vehicles' background in light and medium armored vehicles will enable the combined company to offer a comprehensive capability to its worldwide customer base; ++In particular, it will enhance the ability of the company to compete for future UK MoD business in relation to the development of new armored vehicle technologies, the supply of major new programs such as FRES (Future Rapid Effects System) and the support of the British Army's armored fleet; ++Combining functions between Alvis Vehicles and Vickers Defence Systems in certain areas will provide significant cost savings; ++Acquisition of Vickers OMC will give strong access to the South African and other related markets, and to high caliber/low cost engineering and manufacturing resources; and ++Enhancement to earnings before reorganization costs from the second year of ownership. ++The transaction is subject to Alvis shareholder approval and regulatory approval in the UK and South Africa.
Current trading for 2002 is in line with market expectations. Nick Prest, Chairman and Chief Executive of Alvis, said:
"The acquisition of Vickers Defence is a further important step in the development of Alvis as a major force in the international armored vehicle market. Vickers Defence brings a solid order book, complementary technical and management strengths, and opportunities to improve cost efficiency through some rationalization. The combination of Alvis Vehicles and Vickers Defence Systems will bring substantial benefits to customers, to shareholders and, through improved export potential, to the UK."
Lord Bach, Minister for Defence Procurement, commented:
"These are two companies with a proud heritage of providing the UK Armed Forces with the equipment they need. Subject to the decision of the competition authorities, I welcome their efforts to strengthen their position in the global marketplace."
Sir Robert Walmsley, Chief of Defence Procurement, added:
"While I recognize that the proposed transaction will be subject to consideration under the appropriate regulatory processes, I commend the initiative taken by both companies to secure a potential agreement. 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."
-ends- Proposed Acquisition Of Vickers Defence For £16.2 Million
