The UK government is taking an “active interest” in a £7.1bn proposed takeover of aerospace and defence company Meggitt by US rival Parker Hannifin as fears rise over its impact on British jobs and investment.
The bid for Coventry-based Meggitt on Monday would give shareholders 800p a share in cash, representing a premium of 71 per cent to Friday’s closing price.
It is the second time in a handful of days that Kwasi Kwarteng, the UK business secretary who has powers to intervene in takeovers on national security grounds, has taken an “active interest” in a proposed takeover.
Kwarteng signalled last week he may intervene in the £2.6bn proposed bid of US private equity backed Cobham for UK defence group Ultra Electronics after worries on national security grounds surfaced.
The move by Parker, which is based in Cleveland, prompted Meggitt’s share price to rise 55 per cent to 728p by Monday afternoon in London, surpassing its previous record high just below 700p.
Kwarteng is said to be seeking more details from the two companies over their long-term intentions, and their plans to protect jobs and local operations in Britain.
The bid is the latest in a string from US buyers targeting UK companies, particularly those in the defence sector, raising concerns among officials.
No decision to intervene in the Meggitt transaction has been taken, but Kwarteng is said to be determined to ensure the deal, involving one of the few remaining UK-headquartered civil aerospace and defence companies, works in the national interest.
The Department for Business, Energy and Industrial Strategy, BEIS, said: “While commercial transactions remain primarily a matter for the parties involved, the government is closely monitoring the proposed acquisition of Meggitt by Parker Hannifin.”
Meggitt, which traces its roots back to the invention of the world’s first altitude meter for the hot air balloon in 1850, is considered by the government as a “critical supplier” to BAE and Rolls-Royce.
To appease potential concerns, Parker has made a series of commitments to the UK government, including honouring contracts, ensuring the majority of the board are UK nationals, and increasing research and development spend in the country by 20 per cent for the next five years.
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.
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.”
Tom Williams, chair and chief executive at Parker, told the Financial Times: “We’re now reaching out to government officials as we speak.” He said he was confident that talks would go well since the Fortune 250 company was not private equity but a “strategic buyer” that already supplied the UK military.
British government officials say that while Parker has made a commitment to maintain some of Meggitt’s 2,300 headcount in the UK — in R&D, product design and direct manufacturing — it did not cover all jobs.
Kwarteng’s team is said by government officials to want additional safeguards and guarantees over “further new opportunities” in the UK; further assessment of the deal will now be completed by officials at BEIS and the Ministry of Defence.
Under the Enterprise Act 2002 the business secretary has quasi-judicial powers to intervene in mergers and takeovers on grounds of national security, financial stability and media plurality. A broader national security and investment regime comes into force in January 2022.
The US motion and control technologies specialist has a history of taking over UK companies, spending just less than $970m on a spate of deals, the largest of which was the buyout of Domnick Hunter in 2005.
Howard Wheeldon, independent defence analyst, said: “The future of Meggitt is best served by the company being part of a strong international organisation.”
The bid came as Meggitt reported half-year pre-tax profits 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.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50L2JkZjc1ZjA5LTg3NDYtNGU1Yy05MzAxLTIxZjkyM2ZlMjc1N9IBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50L2JkZjc1ZjA5LTg3NDYtNGU1Yy05MzAxLTIxZjkyM2ZlMjc1Nw?oc=5
2021-08-02 13:34:00Z
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