BAE & VT Group Finalize, then Dissolve, UK Surface Ship JV

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As part of Britain’s Defence Industrial Strategy, the Labour Party government and Ministry of Defence actively sought to reduce the number of companies involved in naval surface ship building and maintenance. In fact, they wanted just one company to deal with. Monopolies tend to drive prices up and effectiveness down, but the Ministry of Defense believed that a long-term partnering arrangement with performance guarantees could counteract that natural tendency. They also believed that the expected volume of warship construction and maintenance could no longer support more than one sizeable firm. Rather than force the merger, they dangled a sizeable carrot: they would not issue contracts for the planned CVF aircraft carrier program until they had a single entity to deal with. Almost a year after the original July 25/07 Heads of Terms signed by BAE systems, VT Group, and the UK MoD, BAE Systems plc finalized a legally binding Framework Agreement with VT Group plc (‘VT’) to establish the BVT Surface Fleet Ltd. joint venture as the UK’s premier provider of surface warships and through-life support. The firm would become the UK Government’s strategic partner for the design, build and support of future warships, and will also pursue export opportunities. […]

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