* Meggitt shareholders to get 800p/share in cash
* Shares surge 59% to record high in early trading
* Commitments to British government part of the deal terms
(Adds details, background, share move)
Aug 2 (Reuters) - Parker-Hannifin has agreed to buy
its London-listed rival Meggitt for 6.3 billion pounds
($8.8 billion), with the U.S. company offering commitments to
maintain a strong UK presence for the defence and aerospace
company.
The 800-pence-a-share cash offer carries a 70.5% premium to
Meggitt's closing price on Friday and compares with the stock's
pre-COVID high of 701.8 pence. The stock jumped 59% to an
all-time high of 745 pence on the UK mid-cap index by 0717 GMT.
The takeover of Meggitt, which also operates in the energy
sector, is the latest in a flurry of U.S. firms bidding for
British companies, driven by cheap valuations due in part to the
pandemic and Brexit.
It follows months of media speculation about a merger
interest, with Nasdaq-listed Woodward and an unnamed
private equity group coming up as potential bidders.
The deal also comes when the aviation industry is facing a
severe downturn as the COVID-19 crisis disrupts travel demand.
Meggitt lost 70% in market value in a span of two months as
fears of the pandemic's impact on global economic growth reached
fever pitch in March last year.
Meggitt's first-half results showed a 25% drop in core
earnings to 116.2 million pounds on Monday, but the company said
it was encouraged by the improvement in its civil aerospace
business, which generates more than half of its total revenue.
DEFENCE COMMITMENTS TO UK
The company, which employs more than 9,000 people in 14
countries, is the second British defence firm in recent weeks to
become a takeover target for a U.S.-backed company, following
Cobham's bid for Ultra Electronics.
In the aerospace sector, U.S.-based Global Infrastructure
Partners signed a $4.63 billion deal to buy British private jet
services firm Signature Aviation earlier this year.
Ohio-based Parker said it would offer legally binding
commitments to the British government on its role in the
country.
The U.S. company will continue to meet its contractual
obligations for goods and services supplied to the government,
keep a majority of UK nationals on Meggitt's board and maintain
the company's UK headquarters.
On jobs, it said it would maintain Meggitt's R&D, product
engineering and direct manufacturing labour headcount in the UK
at no less than current levels, while increasing by at least 10%
the number of overall apprenticeship opportunities.
"Bringing together the Meggitt and Parker businesses will
provide increased benefit to the UK with the provision of
technologies, products and capabilities through Meggitt, and a
leading aerospace business in Parker," Meggitt Chief Executive
Tony Wood said.
Parker, which has 2,100 employees in the United Kingdom,
said the deal would add to earnings in the first full 12 months
after closing, adding it expects $300 million of savings and
$250 million in one-time costs relating to the merger.
Rothschild & Co and Morgan Stanley advised Meggitt on the
financial terms of the deal, while Citigroup advised Parker.
($1 = 0.7182 pounds)
(Reporting by Muvija M in Bengaluru; Editing by Sriraj
Kalluvila, Keith Weir and Emelia Sithole-Matarise)
