Meggitt sells off targets business in £57m deal to ease pension black hole
AEROSPACE and energy group Meggitt, which has operations in Birmingham and Coventry, has sold off one of its operations in a £57.5m deal designed to reduce its pensions deficit.
The company has sold Meggitt Target Systems, a leading international provider of unmanned aerial, naval and land-based target systems, to defence supplier QinetiQ Group.
During the year to December 31, 2015, Ashford-based Meggitt Target Systems generated £26.1m revenue and £4.9m EBITDA. Meggitt has agreed with the its pensions trustee to pay £10.2m from the sale proceeds into the Meggitt Pension Plan to reduce the deficit.
“This transaction is consistent with Meggitt’s strategy to focus on businesses of scale in attractive markets where our leading positions offer greater potential for growth and operational efficiencies,” it said in a market update announcing the sale.
QinetiQ, which has an operation in Malvern, said the acquisition was expected to generate approximately £28m of revenue and approximately £5.5m of operating profit in the year to December 31, 2016.
Meggitt Target Systems provides target systems to approximately 40 countries from its operations in the UK and Canada, and performs on-site target services in 15 of those countries. It will form part of QinetiQ’s new International business unit and will report into QinetiQ’s Global Products division.
In a strategic rationale, QinetiQ said Meggitt Target Systems held a leading position in the growing global target systems and services market and met an increasing global demand for high-fidelity threats. It also generates 90% of its revenue from outside the UK and as such, opened new routes to international markets in Europe, Asia and North America.
The business is expected to be EPS accretive in the first full year of ownership and returns are likely to exceed QinetiQ’s cost of capital within three years.
Steve Wadey, QinetiQ CEO, said: “This acquisition accelerates the delivery of our strategic priorities to drive growth of our core capabilities in international markets, and to modernise and strengthen our ability to deliver world-class test and evaluation services.
“Meggitt Target Systems is a distinctive business with a strong management team and employees in Canada and the UK who are experts in the development and delivery of unmanned target systems and services. We know the business well having worked together for the past decade and I am delighted to welcome the team to QinetiQ.”
