VT Group Rejection of Babcock's Revised Proposal

VT Group plc ("VT" or the "Company") confirms that it received a revised proposal (the "Revised Proposal") from Babcock International Group plc ("Babcock") on 16 February. The Board of VT announces that it has today unanimously rejected this Revised Proposal.

The Revised Proposal, which was between 680 and 715 pence per VT share, again funded through 0.701 new Babcock shares plus cash, was only a small improvement on Babcock's previous indicative offer, continued to significantly undervalue VT and its prospects and still relied on returning the net cash proceeds from the exit of BVT, of which VT shareholders already have the benefit. This Revised Proposal represents:

- A premium of 27% to 33% to the VT share price (537.5 pence) as at the close of business on 2 February, the day before Babcock's approach.

- A premium of 29% to 36% to VT's one month average share price (527.1 pence) prior to Babcock's interest becoming public.

Babcock's proposal would have resulted in VT shareholders having a material exposure to the enlarged group. The Board of VT maintains that Babcock's rationale for a combination of the two businesses is strategically unsound:

- The transaction would be a retrograde strategic step for VT, which has successfully reduced its exposure to MoD, which could be susceptible to budget cutbacks following the election. By contrast, Babcock, through the acquisition of DML in 2007, has significantly increased its exposure to MoD.

- Incremental growth of the enlarged group would be restricted. Babcock's position as a contractor to MoD in the marine and Defence Estates areas is likely to create a conflict of interest that would prevent the enlarged group from participating in the potential outsourcing of MoD's procurement activities. This is an area of potential growth in MoD and from which a standalone VT is extremely well positioned to benefit.

- The benefits of the potential cost synergies postulated by Babcock, to the extent that they can be realised, are unlikely to be fully retained by the enlarged group as MoD would typically expect to share in these cost savings, which in some cases is a contractual requirement.

- The transaction would put further strain on Babcock's already leveraged balance sheet, which also remains exposed to pension liabilities of over £2 billion and a current net deficit of £287m1. Post transaction and based on the Revised Proposal, the enlarged group would have pro forma 2009 net debt / EBITDA of 2.8 - 3.0x2.

The Board of VT considers that the Company will produce higher growth and better returns for shareholders as an independent business pursuing its support services growth strategy. Further, the acquisition of Mouchel is fully aligned to this strategy and will offer additional opportunities for enhanced returns.

This announcement has not been made with the consent of Babcock and there can be no certainty that an offer will be forthcoming or as to the terms of any offer except to the extent announced by Babcock on 15 February 2010.

A copy of this announcement will be available at www.vtplc.com.

The Directors of VT accept responsibility for the information contained in this announcement. To the best knowledge and belief of the Directors of VT, who have taken all reasonable care to ensure such is the case, the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

Notes

1. Source: Babcock's 2009 half year report.

2. Based on year to 31 March 2009 EBITDA for Babcock of £171.5 million (source: Babcock's 2009 annual accounts) and for VT of £99.9 million (full year to 31 March 2009 as restated in VT's 2009 half year report), net debt for Babcock as at 30 September 2009 of £313.9 million (source: Babcock's 2009 half year report) and pro forma net cash for VT as at 30 September 2009 of £98.7 million (source: VT's 2009 interim results presentation), and cash consideration for the Revised Proposal of £546.8 million to £611.3 million assuming a share price for Babcock of 547 pence (closing price on 16 February 2010, on the evening of which the Revised Proposal was submitted).

Dealing Disclosure Requirements

Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if any person is, or becomes, "interested" (directly or indirectly) in 1% or more of any class of "relevant securities" of VT or Babcock, all "dealings" in any "relevant securities" of that company (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of VT or Babcock, they will be deemed to be a single person for the purpose of Rule 8.3.

Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevant securities" of VT or Babcock by Babcock or VT, or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk.

"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.

Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a "dealing" under Rule 8, you should consult the Panel.