Serco on £350m spending spree

GOVERNMENT contractor Serco went on a £350m Christmas spending spree today, taking it into the local government IT market and US defence services.

Serco unveiled a 320p a share, £235m cash takeover of ITNet, the contractor best known for being thrown off an £80m contract for the Cabinet Office.

Serco, whose interests include running prisons and the Docklands Light Railway, said it wants ITNet to take it into the potentially lucrative local authority IT outsourcing market and to use ITNet's expertise in Serco's specialist markets.

The deal, which offers a partial share alternative, is something of a result for ITNet shareholders who saw the stock halve to below 160p in the summer after the Cabinet Office row.

Serco also said it is spending $215m (£113m) in cash on buying RCI, a specialist service supplier to the US federal government and especially its biggest spender, the Department of Defense, offering technology services to the US Navy and Army. Buying RCI means around 12% of Serco's total business will now be in North America.

Serco shares were off from their recent rally, down 9¼p to 226p.