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Babcock rejects Serco merger attempt

The combined entity would have been worth £4bn
June 17, 2019

Babcock International (BAB) confirmed that it received “an unsolicited and highly preliminary proposal” from outsourcer Serco (SRP) in January 2019 that proposed an all-share merger between the two companies.

IC TIP: Sell at 484p

The proposal was unanimously rejected by the Babcock board, which said in an announcement that no further offer has been made by Serco. The deal, which was first reported by The Sunday Times, would have created an entity worth £4bn. According to The Sunday Times, a first attempt at a deal was made late last year when Serco chairman, Sir Roy Gardner, approached his Babcock counterpart, Mike Turner.

The offer was rebuffed and followed by January’s proposal, which outlined Serco’s vision for a new defence giant. The new entity would have been chaired by Gardner and run by Rupert Soames, Serco’s current chief executive, the newspaper claims, while Babcock chief executive Archie Bethel would have been ousted. It is understood that the outsourcer is no longer interested in pursuing the merger. Serco declined to comment on the story.

Liberum forecasts Babcock full-year 2020 pre-tax profits and earnings per share of £438m and 73.2p.