Meggitt shares plunge as TransDigm ducks multi-billion dollar takeover battle

 (BAE Systems)
(BAE Systems)

SHARES in Meggitt plunged by more than 12% on Tuesday - wiping almost £1 billion from the value of the UK defence contractor - as one of two potential bidders withdrew from a multibillion-pound takeover battle.

TransDigm, which is listed on the New York Stock Exchange, said it would not make a firm offer for Meggitt after floating a potential £7 billion bid last month.

It will end a period of uncertainty for Meggitt’s board, which had already agreed a smaller deal with another US company before TransDigm got involved.

TransDigm’s chairman, W. Nicholas Howley, said: “We have long admired and studied the Meggitt business and believed that a combination between the two companies could provide value to investors of both companies.

“However, based on the quite limited due diligence information that was made available and the resulting uncertainties, TransDigm could not conclude that an offer of 900 pence per Meggitt share would meet our long-standing goals for value creation and investor returns.”

He said that the company had put time, effort and resources into the potential deal, and had reached an understanding with Meggitt’s pension plan trustees.

“However, consistent with our disciplined approach to capital allocation, we make acquisitions only when we see a clear path to achieving our investment return goals with a reasonable degree of certainty,” Mr Howley said.

The news was devastating for Meggitt’s share price, which plummeted following the announcement.

The board will now have to go back to Parker Hannifin, the US group with which it had earlier agreed a deal of 800p per share.

However, on Tuesday shares dropped 13% from around 850p to just 730p, indicating investors are uncertain whether the Parker Hannifin deal will go ahead.

The share price is still considerably higher than the approximately 470p at which Meggitt was trading in July, before either bid was revealed.

The potential takeover of Meggitt, and a bid for fellow UK defence contractor Ultra Electronics, has caused scrutiny with Business Secretary, Kwasi Kwarteng,s reported to have ordered an investigation into whether the takeovers would harm the UK’s national security.

Meggitt makes parts for military aircraft, including BAE Systems’ Eurofighter Typhoon and F-35.

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