Royal Ordnance - History - Privatisation

Privatisation

On 2 January 1985, Vesting day, the twelve ROFs that still remained open, plus the Waltham Abbey South site, RSAF Enfield and three Agency Factories, became a UK Government-owned company: Royal Ordnance plc. Its headquarters was moved to ROF Chorley, Lancashire; with its registered office located in central London. The intention of the government at this stage was to privatise Royal Ordnance as soon as possible through a stock market flotation.

In mid-1985 a target date of July 1986 was set; however, by June 1986 the government announced that flotation would not be possible and that it intended to sell the company privately. The following problems were identified as barriers to a flotation:

• The future of ROF Leeds, notably the uncertain future due to over-capacity in UK main battle tank production.
• The future relationship between the MOD and the company.
• The financial position of the company.
• Liabilities regarding a contract with British Aerospace

The problems associated with ROF Leeds were solved when Royal Ordnance agreed the sale of the factory and intellectual property rights of the Challenger tanks to Vickers plc on 4 October 1986, the final agreement was signed on 31 March 1987 valuing ROF Leeds at £15.2 million. Vickers became Alvis Vickers and, in 2004, became part of BAE Systems, and the Leeds factory was closed. The relationship with the MOD was resolved by certain guarantees given to the company by the MOD regarding future procurement strategies. The financial position of the company was resolved by a Treasury cash injection and the proceeds of the ROF Leeds sale. The liabilities were with regard to a sub-contract for a missile systems between British Aerospace (BAe) and an MOD research establishment transferred to Royal Ordnance on Incorporation; BAe and the MOD reached agreement in February 1987.

Bids for Royal Ordnance Plc were invited in October 1986, resulting in six offers. These were eventually reduced to two; one from British Aerospace and one from Guest, Keen & Nettlefolds (GKN). The £188.5 million GBP BAe offer was accepted, and the sale was completed on 22 April 1987.