Meggitt agrees £6.3bn takeover by Parker Hannifin

Aerospace & Defence updates

UK aerospace and defence company Meggitt is to be taken over by US rival Parker Hannifin in a £6.3bn deal that marks the latest approach for a UK listed company by an overseas buyer.

Meggitt shareholders will receive 800p per share in cash in the agreed deal, representing a premium of 71 per cent to Friday’s closing price.

Sir Nigel Rudd, chair of Meggitt, said: “The board of Meggitt is confident that Parker will be a responsible steward of Meggitt and unanimously recommends Parker’s offer.”

The bid is the latest in a string from US buyers targeting UK companies, particularly those in the defence sector. Last week, the UK government signalled it might intervene in the proposed £2.6bn takeover of defence specialist Ultra Electronics by US private-equity backed rival Cobham, while Senior, the FTSE 250 aerospace and defence group, has rejected an approach by US investment company Lone Star.

To appease potential concerns, Cleveland-based Parker made a series of commitments to the UK government including honouring contracts, ensuring the majority of the board are UK nationals and increasing R&D spend in the country by 20 per cent in the next five years. It also promised to protect Meggitt jobs in the UK, where it employs about 2,300 people.

Shares in Meggitt soared almost 60 per cent to 745p on Monday, surpassing their previous record high just below 700p.

Parker, which specialises in motion and control technologies, has operated in the UK for more than 50 years, supplying the Ministry of Defence, Rolls-Royce, BAE and Airbus UK. It has a similar sized domestic workforce as Meggitt across 18 sites.

Parker praised Meggitt’s “high value” technologies and said the deal would “enhance the future prospects of the combined group within global aerospace and defence industries”.

The acquisition would help to nearly double the size of Parker’s Aerospace Systems segment, which made up 20 per cent of the group’s $13.7bn revenues last year. The remainder came from its diversified industrial business.

Together with the legally binding commitments made by Parker, Meggitt’s board put its support behind the offer because of the significant premium and enhanced scale.

Tom Williams, chair and chief executive at Parker, said: “Together, we can better serve our customers through innovation, accelerated R&D and a complementary portfolio of aerospace and defence technologies.”

The bid came as Meggitt reported a half-year pre-tax profit of £49m, reversing losses a year ago, on revenues of £680m. The company has been hit hard by the downturn in civil aviation but the second quarter showed signs of improvement over the first three months of the year.

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