The Defence Support Group (DSG) maintains and repairs key military equipment and manages the storage of the land vehicle fleet.
The deal includes a 10-year contract with Babcock for the maintenance, repair, overhaul and storage of current military vehicles and light weapons.
The contract award follows the announcement of the preferred bidder last month, and will see Babcock continue the services DSG currently provides.
As well as the £140 million that the sale will generate upfront, the Army will also benefit from considerable savings over the next 10 years, seeing a transformation in the way its vehicles such as Challengers and Warriors are maintained.
Minister for Defence Equipment, Support and Technology Philip Dunne MP said:
''I am delighted with the successful outcome of this transaction. Signing this deal with Babcock will put the Defence Support Group on a sustainable long-term footing and will transform the equipment maintenance and repair support that the Army relies on both at home and overseas.''
''Babcock will provide market-leading engineering and fleet management expertise to optimise vehicle availability to the Army at better value for the taxpayer.''
''The £140 million proceeds from the sale and the significant savings over the life of the contract represent outstanding value for money for the tax payer and will allow us to continue to focus our resources on the front line.''
Contract completion is planned for 31 March 2015 and the service provision contract will start on 1 April 2015.
Source: Ministry of Defence (United Kingdom)
Date: Dec 17, 2014