Maritime Sector Restructuring

BAE SYSTEMS PLC
23 March 2006

BAE SYSTEMS plc



MARITIME SECTOR RESTRUCTURING


BAE Systems plc has noted the recent rise in the share price of Babcock
International Group PLC.  BAE Systems plc and other major naval contractors have
recognised for some time that a restructuring of the UK naval surface ship and
submarine sectors would be to the benefit of both the Ministry of Defence and
industry.  A number of exploratory discussions have therefore taken place
between industry participants about potential business combinations. 
Furthermore, the Defence Industrial Strategy, set out in the Defence White Paper
published in December 2005, clearly stated HMG's view that there is need for
consolidation of the UK's Maritime Industrial Base.

Against this background, BAE Systems plc confirms that it is considering various
options in relation to the restructuring of the maritime sector.  It is engaged
in exploratory discussions with VT Group plc with respect to a potential joint
acquisition of Babcock International Group PLC.  No approach has yet been made
to the Board of Babcock International Group PLC and there is no certainty that
any offer will be made.  A further announcement will be made if appropriate.


23 March 2006


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