LONDON, Aug 2 (Reuters) - Britain's Alvis Plc said on Friday it was buying
Rolls-Royce Plc's Vickers Defence business, maker of the Challenger tank, for
16.2 million pounds ($25.2 million) to give it more clout in Europe's armoured
vehicle market.
The deal includes Vickers Defence Systems and Vickers Bridging, both based in
the UK, and a 75 percent stake in Vickers OMC, based in South Africa.
Vickers, whose main clients are the UK Ministry of Defence and other
governments, is a tiny part of Rolls-Royce's operations, one of the world's
biggest makers of engines for civil aircraft and military aircraft and ships.
The acquisition will make Alvis the top armoured vehicle manufacturer in the UK
and Nordic Europe and one of Europe's top three, Chairman Nick Prest told
Reuters.
The addition of the Challenger tank line, heavy vehicles weighing about 30
tonnes, also will augment Alvis' collection of light to medium vehicles, Prest
said.
Vickers order book amounts to 253 million pounds, including an order for
Engineer Tank Systems for the UK Ministry of Defence valued at 218 million
pounds.
"There is a continuing business around Challenger II which has a financial price
to us. We don't say that is the end of the market where we want to be
strategically, but it has a continuing value," Prest said.
There will be some job losses at Vickers, which will probably come after the
deal is completed in September, Prest said. The division employs about 1,300
people.
Alvis' shares rose 1.68 percent to 150-1/2 pence in morning trade, while
Rolls-Royce's shares were off 1.38 percent to 143p.
Rolls-Royce bought Vickers in 1999, including a marine business which it is
keeping.
The long-anticipated purchase, which will add to Alvis's earnings in 2004, comes
after its acquisition of Sweden's Hagglunds Vehicle in 1997 and the UK's GKN
Defence in 1998.
Vickers will also bring with it engineering and software expertise that will
augment Alvis' operations.
The move, which still needs regulatory approval, was welcomed in the UK's
defence ministry.
"I commend the initiative taken by both companies to secure a potential
agreement," Sir Robert Walmsley, chief of defence procurement, said. "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."
Alvis in February said it was in talks with Rolls to buy Vickers and that the
deal would be valued at less than 20 million pounds.
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