Acquisition

Babcock International Group PLC
15 February 2001

Thursday 15th February 2001

BABCOCK INTERNATIONAL GROUP PLC

PROPOSED ACQUISITION OF HUNTING DEFENCE SERVICES

Summary

Babcock announces the proposed acquisition of Hunting Defence Services from
Hunting for a gross cash consideration of £60.9 million.

Hunting Defence Services is a multi-skilled organisation which undertakes a
wide range of technical support and logistical tasks primarily for the Royal
Air Force and the Army under long-term contracts. It also provides technical
and other skilled personnel to the aerospace and telecommunications
industries. For the financial year ended 31 December 1999, Hunting Defence
Services reported turnover on continuing operations of £55.2 million and
operating profit on continuing operations of £5.8 million.

The Directors of Babcock believe that, during the first full financial year of
ownership by Babcock, the Acquisition will be earnings enhancing before the
amortisation of goodwill.*

The Acquisition is in line with the strategy set out by Babcock in July of
last year to focus its resources on expanding its defence and support services
activities. The market for outsourced defence and support services is expected
to grow substantially. By way of example, it is estimated that the UK defence
budget for training and logistics related support services to the Army, Royal
Navy and Royal Air Force amounts to £2.0 billion per annum, of which only
£0.3 billion had been outsourced by the end of 1999.

Hunting Defence Services' experience with the Royal Air Force and Army will
complement Babcock's activities at Rosyth and the prospective partnering
arrangements at Faslane that Babcock announced in January 2001 for the Royal
Navy. The combination of Babcock's current capabilities in the defence support
services arena for the Royal Navy and those of Hunting Defence Services to the
Royal Air Force and the Army will form an excellent platform for growth in
providing services to all three branches of the UK armed forces.

Commenting on the Acquisition, Gordon Campbell, Chairman of Babcock, said:

'This transaction will accelerate Babcock's repositioning as a support
services and facilities management group and as a leading supplier of such
services to the UK's armed forces. It also facilitates the extension of our
skills into the civil market in line with our stated strategy.'

In view of its size, the Acquisition is conditional, inter alia, upon the
approval of Babcock's ordinary shareholders and the shareholders of Hunting. A
circular giving further details of the Acquisition and Hunting Defence
Services and containing notice of an extraordinary general meeting to seek
approval for the Acquisition will be sent to Shareholders shortly.

A presentation to analysts will take place at 10:00am at the offices of
Hawkpoint Partners Limited, 4 Great St. Helens, London, EC3A 6HA.

Enquiries:

Babcock International Group PLC     020 7665 4500

Gordon Campbell

Nigel Young

Hawkpoint Partners Limited (financial adviser to Babcock)     020 7665 4500

David Renton

Chris Robinson

Citigate Dewe Rogerson     020 7282 2945

Ginny Pulbrook

Hawkpoint Partners Limited, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for Babcock and no one
else in connection with the Acquisition and will not be responsible to anyone
other than Babcock for providing the protections afforded to customers of
Hawkpoint Partners Limited nor for giving advice in relation to the
Acquisition.

This summary should be read in conjunction with, and is subject to the text
of, the full announcement.

Notes to editors

Babcock is a multinational engineered systems and services group,
headquartered in the UK. It executes business worldwide from its operations in
16 countries. BES provides engineering and technology support services to the
defence, rail, marine and 'secure facilities' sectors. BMH delivers materials
processing technologies and engineered systems to a range of industries.

In the year to 31 March 2000, Babcock reported group turnover from continuing
operations of £470.7 million and profit before tax excluding non-operating
exceptional items of £25.0 million.

Thursday 15th February 2001

BABCOCK INTERNATIONAL GROUP PLC

PROPOSED ACQUISITION OF HUNTING DEFENCE SERVICES




 1. Introduction

    Babcock announces the proposed acquisition of Hunting Defence Services
    from Hunting for a gross cash consideration of £60.9 million, subject to
    adjustment based on the net assets of Hunting Defence Services at
    completion.

    Due to its size relative to the size of the Group, the Acquisition is
    conditional, inter alia, upon the approval of Babcock's ordinary
    shareholders. A circular giving further details of the Acquisition and
    Hunting Defence Services and containing notice of an extraordinary general
    meeting to seek approval for the Acquisition will be sent to Shareholders
    shortly.

 2. Information on Hunting Defence Services

    Hunting Defence Services has two divisions, Hunting Contract Services
    ('HCS') and Hunting Technical Support ('HTS').

    HCS is a multi-skilled organisation which undertakes a wide range of
    technical support and logistical tasks primarily for the Royal Air Force
    and the Army. It is a leading provider in the UK of specialist support
    services to the Ministry of Defence ('MoD') under long-term contracts. HCS
    has been providing services to the Royal Air Force since 1990 and won the
    first Public Private Partnership ('PPP') contract with the Army Training
    and Recruitment Agency, providing non-tactical training and fighting
    vehicle maintenance at RACC Bovington, in 1998.

    HCS' business has six major contracts which together account for nearly 90
    per cent. of turnover. These contracts include the Joint Elementary Flying
    Training School where HCS provides and operates aircraft under PFI
    arrangements for the three services, along with the provision of training
    instructors, air traffic controllers and ground staff for the operations.
    HCS was awarded this contract in 1993 and the contract was extended for a
    further five years in 1998.

    Under the RAF Cranwell and RAF Lyneham Multi-Activity Contracts ('MACs'),
    HCS provides aircraft maintenance and various support services. The RAF
    Cranwell contract was awarded to HCS in 1990 and was retained following a
    competitive tender in 1997.

    The Flight Simulator and Synthetic Training contract covers the
    maintenance of flight simulators and synthetic training equipment at some
    15 sites together with staff to run the simulator operations.

    Hunting Defence Services also operates and maintains temporary field
    accommodation for the armed forces in Kosovo as a sub-contractor of
    Hunting Engineering Limited, a subsidiary of Hunting.

    HCS' order book as at 31 December 2000 was £84.0 million and more than £
    30.0 million of further work relating to extending existing contracts is
    currently being negotiated. HCS is also currently bidding or preparing
    bids either individually or as part of a consortium, for a number of
    significant contracts.

    HTS, together with Acetech, supplies technical and other skilled personnel
    to the aerospace and telecommunications industries. Their clients include
    DERA, major defence contractors, international airlines and a number of
    telecommunications service providers. HTS and Acetech provide personnel in
    the UK, Canada, Europe and the Middle East. In the year ended 31 December
    2000, approximately 18 per cent. of their combined revenues was derived
    from the telecommunications market and 82 per cent. from the aviation and
    other markets.

    For the financial year ended 31 December 1999, Hunting Defence Services
    reported turnover on continuing operations of £55.2 million and operating
    profit on continuing operations of £5.8 million. As at 31 December 1999,
    the net asset value of Hunting Defence Services was £17.7 million, which
    equates to £1.6 million after excluding cash and borrowings not being
    acquired. In the year to 31 December 2000, Hunting Defence Services'
    performance was slightly ahead of the previous year.

 3. Background to and benefits of the Acquisition

    Market environment

    In 1998, the UK Government committed itself to the Strategic Defence
    Review (the 'Review') which aimed to modernise and reshape the UK armed
    forces to meet the challenges of the 21st century. Following the Review's
    recommendations, the MoD created the Defence Procurement Agency ('DPA')
    and the Defence Logistics Organisation ('DLO'). The objectives for the DPA
    and DLO include the introduction of smart procurement policies, partnering
    between the MoD and its contractors and the outsourcing of
    non-mission-critical activities. In the Review the MoD placed strong
    emphasis on innovation, PFI and larger and longer term contracts with a
    premium upon provision of output-based services.

    At the heart of the Review is a series of initiatives across the defence
    industry to coordinate the activities of the Army, the Royal Navy and the
    Royal Air Force more closely, pooling their expertise and maximising their
    effectiveness, while at the same time eliminating duplication and waste.

    To date the MoD has signed over 30 PFI projects with a capital value of
    over £1.0 billion, and more than 90 other projects with an estimated
    capital value of £6.0 billion are under active consideration. It is
    estimated that the UK defence budget for training and logistics related
    support services to the Army, the Royal Navy and the Royal Air Force
    amounts to £2.0 billion per annum, of which only £0.3 billion had been
    outsourced by the end of 1999.

    Babcock's strategic objectives

    At the time of its annual general meeting in July 2000, Babcock announced
    a number of strategic initiatives, including its intention to focus its
    resources on expanding its defence and support services activities.

    The first key step in the delivery of the strategy was agreeing a
    Memorandum of Understanding with the MoD, signed on 24 January 2001, on
    prospective partnering arrangements between Babcock and the Clyde Naval
    Base (Faslane/Coulport) to supply engineering maintenance and support and
    other naval base services such as facilities management.

    The Acquisition will represent a further step in the delivery of this
    strategy and an excellent opportunity for Babcock to become a leading
    player with a strong market position in the provision of support services
    to the UK defence industry. The enlarged group will have an established
    track record in the MoD outsourcing programme and will be well positioned
    to secure strong consortium partners to compete effectively in the PFI/PPP
    bidding process.

    The combination of Babcock's current capabilities in the defence support
    services arena for the Royal Navy and those of Hunting Defence Services to
    the Royal Air Force and the Army will form an excellent platform for
    growth in providing services to all three branches of the UK armed forces.

    The Directors believe that, during the first full financial year of
    ownership by Babcock, the Acquisition will be earnings enhancing before
    the amortisation of goodwill. This statement should not be interpreted to
    mean that the future earnings per ordinary share following the Acquisition
    will necessarily be greater than the historic earnings per ordinary share.

 4. Principal terms of the Acquisition

    Under the Acquisition Agreement, Hunting Aviation Limited ('HAL') will
    sell Hunting Defence Services to Babcock Rosyth Defence Limited ('BRDL')
    for a gross cash consideration of £60.9 million, subject to an adjustment
    based on the net assets of Hunting Defence Services at completion.
    Completion of the Acquisition is conditional upon the approval by Ordinary
    Shareholders of the Acquisition at the EGM, its approval by Hunting's
    shareholders at an extraordinary general meeting of Hunting and the
    obtaining of consent to assignment/novation of certain key contracts of
    Hunting Defence Services with various counterparties. Such consents are
    expected to be obtained by the end of February 2001.

    Babcock will fund the Acquisition from a combination of existing cash
    resources and a new bank facility to be provided by The Royal Bank of
    Scotland plc and HSBC Bank plc.

    If Hunting shareholders do not approve the disposal to Babcock, HAL has
    agreed to pay BRDL a termination fee of £1.5 million. Similarly, if
    Ordinary Shareholders do not approve the Acquisition, BRDL has agreed to
    pay HAL a termination fee of £1.5 million save in certain agreed
    circumstances.

    Further details of the principal terms of the Acquisition Agreement and
    the new banking facility will be set out in the circular to be sent to
    Shareholders.

 5. Current trading of the Group and prospects for the enlarged group

    As stated in the Interim Results published on 19 November 2000, Babcock
    has continued to make progress towards the implementation of the strategic
    initiatives announced at the time of its annual general meeting in July
    2000. In October 2000, Babcock implemented a return of capital to Ordinary
    Shareholders totalling £30.6 million via the issue and subsequent
    repurchase of bonus B Shares and a 5 for 6 ordinary share capital
    consolidation.

    The sale process for BMH announced in July 2000 continues although it is
    becoming evident that a disposal of BMH in its entirety may not be the
    best way to maximise shareholder value and other alternatives are being
    considered. The Acquisition is not dependent on the sale of BMH.

    The proposed disposal of Babcock's Railcare interests to Adtranz lapsed in
    November 2000 following its referral to the Competition Commission.
    Further losses are expected to be incurred at Railcare during the second
    half of the current financial year as that business is repositioned.
    Babcock announced in December 2000 the intention to implement some
    250 redundancies in order to return the Railcare business to profit.
    Babcock is currently in discussions about the sale of Railcare with a
    number of potential acquirers.

    Trading for the Group since September has been mixed. BES at Rosyth
    remains on track but the division has had to absorb the cost and
    disruption of relocating the FBM business after its acquisition in March
    2000. There have been contract delays within BMH in the third and fourth
    quarters and this will be reflected in BMH's contribution to the results
    of the enlarged group for the year. The contribution from Hunting Defence
    Services in the current year will be small as the Acquisition is expected
    to complete during March.

    Overall, therefore, results are likely to be somewhat disappointing for
    the current year, but the proposed acquisition of Hunting Defence
    Services, together with the actions referred to above, will significantly
    enhance the future prospects of the enlarged group.

 6. Conclusion

At the time of the Interim Results, Babcock said that the successful
completion of the strategic initiatives announced at its annual general
meeting to enhance shareholder value would radically transform the Group and
that, following the return of cash to Ordinary Shareholders, the Group would
still have significant resources to pursue its support services strategy.
Babcock considers the Acquisition to be an excellent opportunity to deploy
these resources and the Board will recommend that Shareholders support the
Acquisition.

Enquiries

Babcock International Group PLC 020 7665 4500

Gordon Campbell

Nigel Young

Hawkpoint Partners Limited 020 7665 4500

David Renton

Chris Robinson

Citigate Dewe Rogerson 020 7282 2945

Ginny Pulbrook



Hawkpoint Partners Limited, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for Babcock and no one
else in connection with the Acquisition and will not be responsible to anyone
other than Babcock for providing the protections afforded to customers of
Hawkpoint Partners Limited nor for giving advice in relation to the
Acquisition.

                                 DEFINITIONS

The following expressions shall have the following meanings in this press
announcement, unless the context requires otherwise:
'Acetech'     Acetech Personnel Limited, a subsidiary of HAL and, together with
              HTS, one of the businesses forming part of Hunting Defence
              Services
'Acquisition' the proposed acquisition by BRDL of Hunting Defence Services as
              described in this press announcement
'Acquisition  the conditional agreement between Babcock, BRDL, HAL and Hunting
Agreement'    in connection with the Acquisition
'Babcock' or  Babcock International Group PLC
the 'Company'
'BES'         Babcock Engineering Services, a division of Babcock
'BMH'         BMH Technologies, a division of Babcock
'Board'       the directors of Babcock
'B Shares'    non-cumulative redeemable preference shares of 18 pence each in
              the capital of Babcock
'EGM'         an extraordinary general meeting of the Company to be convened to
              approve the Acquisition
'Group'       Babcock and its subsidiary and associated undertakings
'FBM'         FBM Marine Limited, a subsidiary of Babcock
'HCS'         Hunting Contract Services, a division of HAL and one of the
              businesses forming part of Hunting Defence Services
'Hiberna'     Hiberna FM Limited, a subsidiary of HAL and, together with HCS,
              one of the businesses forming part of Hunting Defence Services
'HTS'         Hunting Technical Support, one of the businesses forming part of
              Hunting Defence Services
'Hunting'     Hunting PLC
'Hunting      the business to be acquired by BRDL from HAL pursuant to the
Defence       Acquisition Agreement, comprising HCS, HTS and the entire issued
Services'     share capital of each of Acetech and Hiberna
'Interim      means the unaudited interim results of the Group for the half
Results'      year ended 30 September 2000 published on 19 November 2000
'Ordinary     holders of Ordinary Shares
Shareholders'
'Ordinary     ordinary shares of 60 pence each in the capital of Babcock
Shares'
'PFI'         Private Finance Initiative, a mechanism whereby public services
              are provided through a partnership between the public sector and
              the private sector, under which contracts to provide a public
              service are awarded to the private sector which assumes a share
              of the risk and usually the maintenance of assets on a long term
              basis
'PPP'         Public Private Partnership, a programme whereby the MoD aims to
              identify and pursue opportunities for private sector involvement
              in the delivery of defence services
'Railcare'    a UK based 60:40 jointly owned venture with Siemens plc
'Shareholders' holders of Ordinary Shares and B Shares