Babcock has announced that it has entered into a definitive agreement with Equitix Investment Management Limited for the sale of its 15.4% shareholding in AirTanker for a cash consideration of £126 million, including the repayment of shareholder loans of £31.1 million, subject to any routine closing adjustments and before transaction costs.

AirTanker Holdings is an asset joint venture with Airbus, Thales and Rolls-Royce, owning fourteen A330 Voyager aircraft to support air-to-air refuelling, air transport and ancillary services for the Ministry of Defence. Babcock retains its 23.5% shareholding in AirTanker Services Limited, which operates these aircraft. 

According to the firm:

“AirTanker Holdings is part of Babcock’s Aviation sector and is accounted for by Babcock as an associate. For the year ended 31 March 2021, Babcock’s share of associate income, included within the Group’s loss, was £(1.1) million and AirTanker Holdings had gross assets of £2.7 billion. The sale is part of Babcock’s ongoing targeted disposal programme, which aims to generate at least £400 million of proceeds. Proceeds from this transaction will be used to reduce net debt.

The deal is expected to complete by the end of this financial year, and is subject to regulatory approvals given the industry AirTanker Holdings operates in. There is no merger control condition. Remaining AirTanker shareholders have pre-emption rights over the Babcock shares. The agreement constitutes a class 2 transaction for the purposes of the UK Financial Conduct Authority’s Listing Rules, and as such does not require Babcock shareholders’ approval.”

Babcock CEO David Lockwood said in a statement:

“This the third disposal we have announced as part of our ongoing programme to streamline the Group and, should all complete, ensures we will meet our target of generating at least £400 million of disposal proceeds this financial year. We are pleased to continue to maintain an interest in AirTanker through our work with AirTanker Services.”

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Reaper
Reaper
1 month ago

I wonder why…

Watcherzero
Watcherzero
1 month ago
Reply to  Reaper

Both companies need cashflow due to downturn in aviation sector during co-vid and so have been gradually selling off subsidiaries. Rolls Royce are selling their shares in the leasing company but retaining their stake in the joint venture that manufactures them.

Reaper
Reaper
1 month ago
Reply to  Watcherzero

Ah right, this Plandemic sucks…it’s destroying our Nation…

Meirion x
Meirion x
1 month ago

So Babcock are jumping off this PFI ship!

Supportive Bloke
Supportive Bloke
1 month ago
Reply to  Meirion x

Could be that Babcock want out so they can do something else for MOD and not have a conflict of interest?

Like the MOD doing a PFI buyout and Babcock running it for the MOD?

Watcherzero
Watcherzero
1 month ago
Reply to  Meirion x

Manufacture and Introduction risk is done, its now a straight leasing company which makes it attractive as a fixed rate capital investment for a bank to park their money and enjoy fixed returns. Babcock and Rolls on the other hand need the cashflow to make up for the downturn in civil aviation/offshore oil and could bank the future profit to reinvest in another project.

Damo
Damo
1 month ago
Reply to  Meirion x

Not quite. They are selling off assets to manage debt and free up capital. Lots of big firms have been doing it over the last few years but off the top of my head i can’t think of any defence ones

Ron
Ron
1 month ago

Its not just Babcock, Rolls Royce is selling their share as well for £189 million to Equitix.

PaulW
PaulW
1 month ago

Maybe time for MOD to un-PFI this rather important asset.

Andy Poulton
Andy Poulton
1 month ago
Reply to  PaulW

You won’t be able to “un PFI” it. The government looked at PFI contracts that are bleeding the education and healthcare sectors and found them pretty much unbreakable. The cost to break ending up as being very similar to the cost of running them to the contractual end.

They are extremely well written.