Babcock International Group Plc · LSE:BAB
Babcock International — Merger or Acquisition (March 2010)
32 slides from Babcock International's merger presentation, Mar 23, 2010
Slide 1: Recommended acquisition of VT Group plc
Recommended acquisition of VT Group plc 23 March 2010 1
Slide 2: Information Notice
Information Notice This document has been prepared solely for its use at the presentation to analysts to be made on 23 March 2010 in connection with the proposed acquisition by Babcock International Group PLC (“Babcock”) of all of the issued and to be issued shares of VT Group plc (the “Acquisition”
Slide 3: Information Notice
Information Notice Certain statements in this document and the presentation are forward-looking statements. By their nature, forward- looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or impl
Slide 4: Agenda
Agenda • Overview Peter Rogers • Strategic rationale Peter Rogers • Key financials Franco Martinelli • Summary Peter Rogers 4
Slide 5: Overview
Overview Peter Rogers - Chief Executive Officer 5
Slide 6: Acquisition overview
Acquisition overview • Proposed acquisition of VT Group plc for £1,326m – 734.9p per share comprising 361.6p cash and 0.701 Babcock shares • Clear and compelling strategic rationale – creates one of the largest and most focused engineering support services companies in the UK • Clear and compelling
Slide 7: Broad spread of combined revenues
Broad spread of combined revenues Combined pro forma revenues of £3bn for year ended 31 March 2009 VT VT Group Group Babcock Babcock Combined Combined Non- Non- Non- Defence Defence Defence 34% 35% 35% Defence Defence Defence 66% 65% 65% Total Total 2009: 2009: £1.1bn £1.1bn Total Total 2009: 2009:
Slide 8: A logical combination
A logical combination • Babcock and VT – a much discussed combination • Two highly complementary businesses, similar – markets and contracts – customers – engineering based skills, knowledge and experience – cultures – reputations for quality, service and delivery – history • We already understand –
Slide 9: Strategic rationale
Strategic rationale Peter Rogers 9
Slide 10: Building on a successful strategy
Building on a successful strategy • We have successfully delivered our strategic objective – to be the leading engineering support services company in the UK and selected overseas markets thus creating superior returns for our shareholders • We have consistently achieved double digit growth • We hav
Slide 11: Strategic benefits of acquisition
Strategic benefits of acquisition • Increased scale, skills and capabilities in core markets – deeper and wider market coverage – better placed to lead rather than participate in bids – better placed to bid for larger more complex contracts – better placed to manage risk • Delivering a broader range
Slide 12: Defence: Increased scale and capabilities
Defence Increased scale and capabilities • Broad and deep support capability across the UK MoD in land, sea and air Infrastructure Equipment Training and Communications support education Land • RPC East • Jackals • RSME • SLAM • White Fleet Chatham/Minley • ALC • REME • Allenby Connaught Bordon/Arbo
Slide 13: Defence: Stronger customer relationships
Defence Stronger customer relationships • Enhances strategic importance to customer – ability to work in partnership with customer to provide enhanced solutions • Better placed to deliver increased efficiencies and services Infrastructure Equipment Training and Communications support education Land
Slide 14: Defence: Future opportunities
Defence Future opportunities • Better placed to lead rather than participate • Enhanced capabilities to win larger, more complex support contracts Opportunity Babcock VT Combined offering DTR2 • FM capability • Training analysis and • Comprehensive solution c.£100m p.a. delivery capability • Enhance
Slide 15: Nuclear: Increased scale, capabilities and coverage
Nuclear Increased scale, capabilities and coverage Nuclear Power Nuclear New Build Defence and Generation Decommissioning Research Combined • Sizewell • Dounreay (Tier 1) • NII – Generic • Nuclear • Hinkley Point • Harwell (Tier 1) design assessment submarines • Dungeness • Winfrith (Tier 1) • Devel
Slide 16: Nuclear: Broader offering
Nuclear Broader offering • Operating at Tiers 1, 2 and 3 in both civil and defence nuclear markets – 3,000 employees • Opportunity to build on VT’s strong customer relationships at Sellafield • Combined capabilities strengthen ability to support British Energy’s ongoing nuclear operations • Opportun
Slide 17: Critical infrastructure: Increased scale
Critical infrastructure Increased scale • Strong business in government and regulated industries • Complementary skills across a broader range of customers Infrastructure Equipment Training and Communications support education Civil • National Grid • BA Ground • Network Rail • Government Support Age
Slide 18: Critical infrastructure: Broader offering
Critical infrastructure Broader offering • Well positioned to use enhanced range of skills and expertise to deliver broader range of customer solutions • Opportunity to develop strong training and education business in a fragmented civil market – with both new and existing customers Babcock VT Combi
Slide 19: International opportunities
International opportunities • Well positioned to use enhanced range of skills and expertise to deliver broader range of customer solutions • Opportunities to sell complementary capabilities in overseas markets where the combined Group has an established presence – training – equipment support – comp
Slide 20: International opportunities
International opportunities Markets Babcock VT Combined offering • Marine technical • Kings Bay nuclear • Develop more support capability submarine base technically based US infrastructure support support offering at • TCIF contracts contract Kings Bay • VISCC contract • On-board training ships • Op
Slide 21: Key financials
Key financials Franco Martinelli – Group Financial Controller 21
Slide 22: Transaction structure
Transaction structure • Recommended cash and shares offer valuing each VT share at 734.9p – cash of 361.6p per share – 0.701 new Babcock shares – equivalent to 373.3p per share (1) • Offer represents a premium of 39.5% to the one month average share price for VT on 12 February 2010 • Mix and match f
Slide 23: Financial highlights
Financial highlights • Strong financials – £3bn 2009 pro forma revenue – anticipated merger benefits of c.£50m p.a. and financial efficiencies of c.£8m p.a. – expected net debt to EBITDA of c.2.9x* at the time of acquisition – excellent cash generation – historic cash conversion 2009 - Babcock 115%,
Slide 24: Broad spread of combined revenues
Broad spread of combined revenues Combined pro forma revenues of £3bn for year ended 31 March 2009 Revenue Revenue split split Revenue Revenue split split by by sector sector by geography by geography RoW 9% Non-Defence USA 35% 11% Defence UK 65% 80% Source: company reports 24
Slide 25: Strong synergies
Strong synergies • Anticipated merger benefits of c.£50m p.a. by end of 2013 financial year (pre-tax) – expected additional financial efficiencies of c.£8m p.a. – less than 2% of combined revenue • Sources of cost savings include: – eliminating duplicate management teams at head and regional offices
Slide 26: Robust capital structure
Robust capital structure • VT shareholders will own c.36% of the issued share capital of enlarged Group – 126.5m Babcock ordinary shares to be issued • Babcock has entered into – a bridge facility of £400m and – a backstop facility of £600m • Expected net debt to EBITDA of the enlarged Group at the
Slide 27: Expected timetable of events
Expected timetable of events • Rule 2.5 announcement – 23 March 2010 • Documents posted to shareholders – end of April 2010 • Babcock full year results announced – 11 May 2010 • Regulatory clearance – HSR, OFT, CFIUS – May/June 2010 • Babcock General Meeting to approve acquisition – May 2010 • VT Ge
Slide 28: Summary
Summary Peter Rogers 28
Slide 29: Integration plan: Managing the enlarged Group
Integration plan Managing the enlarged Group • Track record of successful acquisitions and delivery of merger benefits • Significant integration experience within senior management team • Excellent co-operation from VT senior management team 29
Slide 30: Combined Group: Strategic market positions
Combined Group Strategic market positions • Marine – unique infrastructure and customer position – key role on all major UK naval defence initiatives • Defence – strong position to serve the customer across land, sea and air – key capabilities in equipment support, infrastructure, training and commu
Slide 31: In summary
In summary • The combination of Babcock and VT – brings together two highly complementary businesses – creates one of the largest and most focused engineering support service companies in the UK • Clear and compelling strategic rationale – increased scale and capabilities in core markets • Strong fi
Slide 32: Babcock International Group Plc
babcock trusted to deliver™ Babcock International Group Pic www.babcock.co,uk
Babcock International Group — Merger or Acquisition (March 2010) on 6ix