Another of Britain’s heritage engineering assets today moved to the brink of foreign ownership after US firm Parker-Hannifin revealed a £6.3 billion swoop for the aerospace and defence products firm Meggitt.
The 800p a share agreed deal for FTSE 250-listed Meggitt is a 70% premium on Friday’s price and also higher than where the Coventry-based firm traded prior to the pandemic.
It is the latest in a long line of bids for industrial assets in the UK, with aerospace and defence now a key battleground after last month’s £2.6 billion attempt by Cobham’s private equity owner Advent to buy Ultra Electronics.
Parker, a Fortune 250 firm specialising in motion and control technologies, said the addition of Meggitt would double the size of its aerospace systems division.
The US-based firm has a long history of operations in the UK, employing more than 2,000 people at 18 facilities, and has made a series of binding commitments to the UK government should its takeover get the backing of Meggitt shareholders. Both companies are defence suppliers to the UK and US governments.
Meggitt employs 9,000 people across 37 sites globally in the design and manufacture of high performance components and sub-systems, including braking systems, sensors and advanced polymer seals for commercial and defence aircraft. Other major customers include Airbus, Boeing and BAE Systems.
The company traces its history back to the 19th century, including aviation innovations such as the world’s first altimeter for hot air balloons.
Chairman Sir Nigel Rudd said the offer would “significantly accelerate and de-risk” Meggitt’s growth strategy. If the deal goes through, it adds to a list of UK assets including Invensys, Signature Aviation, Alliance Boots and Pilkington where the City grandee has been chairman at the time of the takeover.
Sir Nigel had been due to step down last year but stayed on due to the onset of the pandemic, with Meggitt having to cut 1,800 jobs globally amid a rapid deterioration in the civil aerospace sector.
He backed Parker to be a “responsible steward” of Meggitt, based on “far-reaching commitments” that ensured Meggitt’s significant presence in the UK, increased investment in R&D, and more apprenticeship opportunities in this country.
Shares across the aerospace engineering sector soared today, with the valuation helping to lift Rolls-Royce and the GKN owner Melrose Industries by 4% and 6% respectively. The FTSE 250 index, which has seen the bulk of the recent takeover action, surged by 1.5% to a record high amid hopes for further deals.
AJ Bell investment director Russ Mould said: “UK stocks have long been considered cheap and this year’s M&A spree shows that overseas investors have finally got enough confidence to pounce on opportunities after years of showing little interest in the market.”
Meggitt shares jumped 58%, but at 741.6p they are still below the 800p bid price. The company also posted interim results showing a 43% fall in underlying profits to £48.4 million, but has been encouraged by a quarter-on-quarter recovery in revenues for its civil aerospace business.
Rothschild and Morgan Stanley are advising Meggitt, with Citigroup working on behalf of Parker.