US giant swoops for Meggitt in £6.3bn deal
Meggitt, the Ansty-based manufacturer of components for the power and aerospace industries, is set to be sold to a US counterpart in a huge cross-border deal.
Parker-Hannafin Corporation will pay £6.3bn for Meggitt in a deal which will see the Warwickshire firm’s shareholder receive £8 per share.
The acquisition of Meggitt will nearly double the size of Parker’s aerospace division.
The deal comes with some caveats tied in with the sensitive work Meggitt undertakes for the UK Government. Parker has outlined a series of commitments because of this, including ensuring that the majority of board directors of Meggitt will be UK nationals, keeping Meggitts headquarters in Ansty and retaining current numbers of staff and R&D spend.
Tom Williams, chairman and chief executive officer of Parker said: “The combination of Parker and Meggitt is an exciting opportunity for both companies’ team members, customers, shareholders and communities. We strongly believe Parker is the right home for Meggitt. Together, we can better serve our customers through innovation, accelerated R&D and a complementary portfolio of aerospace and defense technologies.”
“We are committed to being a responsible steward of Meggitt and are pleased our acquisition has the full support of Meggitt’s Board. 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. Our own journey over more than 100 years has taught us the importance of a strong culture and reputation.”
Sir Nigel Rudd, chairman of Meggitt, said: “Meggitt is one of the world’s foremost aerospace, defence and energy businesses, leading the market with a strong portfolio of technology and manufacturing capabilities, and holding a significant amount of intellectual property.
“Whilst Meggitt is currently pursuing a strong, standalone strategy which will deliver value to shareholders over the long-term, Parker’s offer provides the opportunity to significantly accelerate and de-risk those plans, while continuing to deliver for shareholders. Parker’s offer also includes far-reaching commitments that will ensure that Meggitt remains a significant presence in the UK, increasing investment in research and development, and increasing the number of apprenticeship opportunities.
The board of Meggitt is confident that Parker will be a responsible steward of Meggitt and unanimously recommends Parker’s offer.”
The news comes as Meggitt posts underwhelming first half figures. Revenues for the six months to June 30 were down 26% to £680m, while profit before tax dropped by 43% to £48.4m.
Despite this, Tony Wood, chief executive, remains upbeat. He said: “The sequential quarterly improvement we have seen in our civil aerospace business in the first half is encouraging including a 31% increase in civil aftermarket organic revenue, reflecting the progressive increase in global air traffic and the active fleet.
“Thanks to the ongoing dedication of our global teams, we delivered a strong cash performance underpinned by our continued focus as we manage the group through the recovery and position our operations for the anticipated increase in new build rates. With a strengthening order book, particularly in energy, the pick-up in order activity in the second quarter provides a supportive backdrop as we enter the second half.”