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Highlights
- Babcock shares advanced more than 8% on Friday
- Company has agreed to sell Frazer-Nash Consultancy to KBR Inc
- The aerospace and defence firm is expected to garner £293 million
- Proceeds from the sale will be utilised to reduce the net debt.
Shares of Babcock International Group Plc (LON: BAB) advanced more than 8% on Friday, 13 August, after the London-headquartered aerospace, defence and security firm announced the sale of Frazer-Nash Consultancy.
Babcock has inked an agreement with Texas-headquartered KBR Inc (NYSE:KBR) in order to offload the wholly owned engineering and technology subsidiary Frazer-Nash Consultancy Ltd. According to the details of the arrangement, Babcock is likely to garner cash proceeds to the tune of £293 million following the completion of the said deal.
A cash consideration of £293 million includes an enterprise value of £285 million, Babcock said in a regulatory filing.
Following the development, the stock of Babcock jumped as much as 8.47% to a four-month high of GBX 332.5 from the previous closing price of GBX 306.60 apiece.
Babcock shares (6-month performance)
Image Source: EODHD/Others
This is the second-highest share price for Babcock in the present calendar year. Earlier in April, the shares registered a year-to-date (YTD) peak of GBX 365.20.
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Barring the latest appreciation in the share prices, the stock of Babcock stands with a YTD gain of little over 15%. On a yearly scale, the stock has nearly gained 8%, while it continues to hover much lower as compared to its pre-pandemic highs.
However, the shares of Babcock have been on a falling trend, irrespective of the coronavirus crisis and the extended set of repercussions for the businesses and squeezed demand for the products. Shares of Babcock recorded an all-time high in the February-March period of 2014. Since then, the stock has witnessed year-after-year corrections. Shares of Babcock clocked a total traded turnover of more than £3.44 million, up until 1320 BST.
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Frazer-Nash Consultancy & the deal
- The prospective deal of selling Frazer-Nash Consultancy has been done under a targeted disposal following which Babcock is looking forward to generating at least £400 million of proceeds in the upcoming 12-month stretch.
- Babcock had acquired Frazer-Nash Consultancy in 2017 and is a part of the former’s marine sector. At the moment, the subsidiary employs nearly 900 people who are collectively responsible for providing engineering and technology solutions.
- Frazer-Nash Consultancy has a network of nine UK and four Australian locations through which the enterprise provides a broad range of solutions for national infrastructure, by providing assurance to operators and regulators and independent services to customers.
- The proceeds from the sale of Frazer-Nash Consultancy will be utilised by Babcock to reduce a potion of net debt
- The deal between Babcock and KBR classifies as class 2 transaction under the listing rules prescribed by the UK Financial Conduct Authority (FCA), subsequent to which Babcock is not obligated to receive shareholders’ go-ahead.
- However, an in-principle approval by the Australian foreign investment authority, the Foreign Investment Review Board (FIRB), will be required for the completion of the said agreement.
