TransDigm abandons possible Meggitt takeover

Meggitt shares plunge 11% as white flag is waved in bid battle by New-York listed aerospace firm TransDigm

Shares in defence contractor Meggitt have plunged this afternoon after one of its proposed buyers said it would not make an offer for the group.

Aerospace components business TransDigm had been considering a £9 per share takeover bid for the FTSE 250 company and had been given until September 14 to make a concrete proposal. 

But it has pulled out of the prospective £7billion offer, citing concerns over a lack of due diligence and a belief that the deal would not satisfy its financial goals.

Pullout: Aerospace manufacturer TransDigm has said it will not make a takeover bid for FTSE 250 company Meggitt, which makes parts for the F-35 fighter jets (pictured)

It means the £6.3billion takeover offer from Ohio-based manufacturing group Parker Hannifin remains the only bid to have been accepted by Meggitt’s board. 

Meggitt is one of the UK’s largest defence companies, supplying parts for the F-35 and Typhoon fighter jets and civilian aircraft built by Airbus, Boeing and Bombardier, and holds contracts with the Ministry of Defence. 

In a statement, 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 longstanding goals for value creation and investor returns.’

The group’s shares were 12 per cent down at 738.4p during the late afternoon today, falling below the £8 per share offer agreed with Parker-Hannifin in early August, though still much higher than its value in July before the deal was announced.  

Meggitt said it ‘believes the Parker offer continues to represent an attractive proposition for Meggitt’s shareholders and for its broader stakeholders, including its employees, pension schemes and customers, together with HM Government, for the long-term.’

Sole bid: Meggitt's proposed £6.3billion takeover offer from Ohio-based manufacturing group Parker Hannifin remains the only proposal to have been accepted by the firm's board

Sole bid: Meggitt’s proposed £6.3billion takeover offer from Ohio-based manufacturing group Parker Hannifin remains the only proposal to have been accepted by the firm’s board

This bid has received controversy as it has raised national security concerns and comes amidst increasing buyouts of UK businesses by foreign firms, including in the defence industry.

When Meggitt revealed it had accepted Parker-Hannifin’s offer, the UK Government said it was ‘closely monitoring’ the deal.

That followed a week after it said it was observing a proposed £2.6billion bid of Ultra Electronics – a major supplier for the Royal Navy – from Cobham, which was itself the subject of a controversial £4billion takeover by US-based Advent International in 2020.

To try and reassure sceptics, Parker has promised to keep the Meggitt’s headquarters and operations in Britain and increase current research and development spending by at least 20 per cent over the following five years, among other promises.

TransDigm abandons possible Meggitt takeover

‘We are committed to being a responsible steward of Meggitt and are pleased our acquisition has the full support of Meggitt’s Board,’ remarked Thomas Williams, Parker’s chairman and chief executive.

‘We fully understand these responsibilities and are making a number of strong commitments that reflect them. During our longstanding presence in the UK, we have built great respect for Meggitt, its heritage, and its place in British industry.’

Takeovers of UK companies by overseas firms rose to their highest levels since the end of 2018 during the second quarter of the year, according to figures released today by the Office for National Statistics.

Two of the biggest transactions to occur were the £7.2billion purchase of insurer RSA by Intact Financial Corporation and Scandinavian insurer Trygand, and the buyout of security firm G4S by US rival Allied Universal Security Services for £3.8billion.

Supermarket giant Morrisons is currently the subject of a bidding war between numerous American private equity firms, including Clayton, Dubillier & Rice and Apollo Global Management. 

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