(Alliance News) - Meggitt PLC on Monday said it has accepted a GBP6.3 billion takeover offer from Parker-Hannifin Corp.
Parker will pay 800 pence per share in cash for the FTSE 250 company, a 71% premium to Meggitt's closing price of 469.10p in London on Friday.
Shares in Meggitt jumped 59% to 746.80p in London on Monday morning, valuing the company at GBP5.85 billion.
Cleveland, Ohio-based Parker makes engineered products for the aerospace, automotive and manufacturing industries. Meggitt, based in Coventry, provides aerospace and defence components. A US takeover of a UK company in a sensitive industry threatens to be controversial.
Aerospace and defence firm Cobham exited the London Stock Exchange in January 2020, following a contentious acquisition by US private equity company Advent, which raised national security risks. In addition, Nadine Cobham – daughter-in-law of the firm's founder Alan Cobham - at the time hit out at the deal.
Meggitt and Parker-Hannifin have agreed to offer legally binding commitments to the UK government as part of the deal. Those include ensuring that a majority of board members are UK nationals and maintaining Meggitt's UK head office and divisions under the name "Parker-Meggitt". They also plan on maintaining headcount levels in the UK, as well as research and development spending.
Meggitt also will continue to comply with and enforce UK government security protocols and allow officials to inspect its premises.
Parker added that it has operated in the UK for over 50 years and has 2,100 employees in the country.
Meggitt shares dropped after the pandemic grounded the aerospace industry, although it has since recovered from its April 2020 low of 217.00p.
Separately on Monday, Meggitt reported a 26% year-on-year decline in revenue in the first half of 2021, to GBP680.0 million from GBP916.8 million. It swung to a pretax profit of GBP33.6 million from a loss of GBP368.4 million a year ago, however.
The company maintained its full-year guidance for organic revenue "broadly in line" with 2020, an underlying profit increase, and positive free cash flow.
Meggitt decided not to pay an interim dividend in light of "ongoing market conditions". The company is yet to resume payouts since cancelling the 2019 final dividend, worth 11.95p per share, in March 2020
Nigel Rudd, chair of Meggitt, said: "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."
Parker Chair and Chief Executive Tom Williams added: "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."
By Ivan Edwards; ivanedwards@alliancenews.com
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