Babcock International, the London-listed defence contractor, is weighing a possible bid for some of the assets of Harland and Wolff, the shipbuilder which is close to collapse.
Sky News has learnt that Babcock, which has a market value of £2.4bn, has expressed an interest in Harland and Wolff’s Belfast shipyard which is famous for having built The Titanic.
News of its interest comes amid reports that Harland and Wolff could fall into administration as soon as next week.
The company has been struggling under the weight of a substantial debt-pile, and was dealt a hammer blow soon after the general election when the government decided against guaranteeing a £200m loan to it.
It was unclear this weekend how serious or advanced Babcock’s interest was in Harland and Wolff’s Belfast shipyard or its other assets.
Several other trade and financial bidders are understood to have signalled their interest in bidding, according to defence industry sources.
Bankers at Rothschild, who are running a sale process to gauge interest in the company and its assets, have set a deadline for proposals of later this month.
Navantia, the Spanish shipbuilder which has a joint contract with Harland and Wolff, is likely to be among the rival bidders.
Teneo is reported to have been put on standby to act as administrators.
Founded 163 years ago, Harland and Wolff operates from three sites other than Belfast: one at Appledore in south-west England, which used to be owned by Babcock; and two in Scotland.
In recent weeks it has been engulfed by management turmoil, with the departure of its chief executive and, this week, its finance chief.
On Friday, Russell Downs, the company’s interim executive chairman, said he had ordered a probe into what he described as an apparent “misapplication” of more than £25m of corporate funds.
Its shares, which are listed on London’s junior AIM stock market, have been suspended for months, and will be delisted if the holding company collapses into insolvency proceedings.
The parent company’s administration will not mean that its operating facilities are insolvent, as they are held in separate corporate entities.
However, there are concerns that such a move would prompt the Ministry of Defence to re-tender a contract that Harland and Wolff has a share in to build three Fleet Solid Support ships for the Royal Navy.
A worker at Harland and Wolff MIG welds an anode onto the rudder. Pic: PA
John Wood, the former chief executive who was forced to step down recently, told The Sunday Times that he was preparing a rescue bid for Harland and Wolff.
He indicated to the newspaper that he could seek an injunction to prevent its holding company being placed into administration.
Babcock has been deeply embedded in Royal Navy shipbuilding contracts for decades, and would be a logical acquirer of Harland and Wolff assets.
Workers at the Harland and Wolff shipyard. Pic: PA
The FTSE-250 group has largely recovered from its own travails of several years ago, announcing last November that it would pay its first dividend for four years.
Shares in Babcock have risen by over 20% during the last year.
Babcock said that it did not comment on speculation.