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Defence large Babcock to financial institution £293m after promoting historic consultancy arm

The London-listed company announced that it would sell Frazer-Nash Consultancy to KBR, an American engineering giant.

The move marks the end of a 14-year partnership between Babcock and the consulting company that emerged from the old-timer manufacturer Frazer-Nash.

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During this time, the consulting company has grown and currently employs around 900 people in the areas of healthcare, energy, defense and transport. It has nine UK locations and four in Australia.

Babcock International Group employs hundreds of people at the Rosyth shipyard in Fife. Picture: Andrew Milligan / PA Wire

The transaction is subject to approval by the Australian authorities, but Babcock shareholders will not receive a vote on the divestment as required by the Financial Conduct Authority.

Last month, Babcock reported an operating loss of £ 1.6 billion for the year, and net debt – though declining – was £ 1.4 billion.

The group had already announced plans to sell approximately £ 400 million worth of businesses over the next 12 months. The sale of Frazer-Nash Consultancy will fill much of that void and the money will be used to pay down debt.

David Lockwood, Babcock CEO, said, “We are making real progress on our plan to streamline the group and focus on our key markets.

“Selling at least £ 400 million to companies as part of our targeted divestment program will allow us to reduce complexity and increase our focus while re-empowering Babcock. Frazer-Nash Consultancy is a good fit for KBR and I wish you every success as the company continues to grow. “

The consulting firm is part of Babcock’s marine sector. For the year ending March 2021, the company had total sales of £ 100.5m, compared to £ 101.9m in the previous year, with earnings before interest and taxes of 13.5m at the end of March 2021, gross assets were to £ 79.9 million.

Frazer-Nash traces its roots back to the 1920s when Archie Frazer-Nash founded the automaker of the same name.

The company began manufacturing machine guns during World War II and held government contracts after the war.

In 1971 the consulting department of the Frazer Nash Group was founded. It was bought by its own management in 1990.

Robin Speakman, an analyst at brokerage firm Shore Capital, said, “After his [full-year] Two weeks ago, the specialized outsourced engineering service provider announced its first major transaction under this program.

“Frazer-Nash reported total sales of 100.5 million [the past financial year] with earnings before interest and taxes of £ 13.5m.

“The agreed sales price suggests an EV [enterprise value]/ Ebitda [earnings before interest, taxes, depreciation and amortisation] probably more than 20 times under normalized trading conditions. This premium on Babcock’s current trade multiplier is clearly very welcome news given the dilution of ongoing profitability within the group.

“With this transaction, Babcock is reaching its goal of € 400 million.

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