American firm to take over Britain’s Meggitt in $8.8 billion deal

American firm to take over Britain’s Meggitt in $8.8 billion deal
179     11:02     03 08 2021    
British defense and aerospace company Meggitt has agreed to a £6.3 billion (U.S. $8.8 billion) takeover by Parker Hannifin. It’s the second time in recent weeks a major British defense company has been targeted by an American rival in a merger bid.

Meggitt announced Aug. 2 that it had recommended the bid by Cleveland-based Parker Hannifin but only after the U.S. company agreed to contractual commitments ensuring, for the time being, Meggitt retains a significant presence in the U.K.

Concerns are growing in the U.K. about the future ownership of the local aerospace and defense sector in the face of takeover bids from foreign companies. In June, electronic warfare and sonar specialist Ultra Electronics was the subject of a takeover bid from Cobham, which is owned by a U.S. private equity firm.

When it was a purely British-owned company, Advent International last year acquired Cobham in a £4 billion deal, made controversial by the efforts of some shareholders to keep the defense and aerospace company in British hands.

The £2.6 billion bid for Ultra has run into trouble, with the Conservative government signaling it could intervene on national security grounds.

Advent has already broken up much of Cobham, selling off several businesses, including its air-to-air refueling activities. It’s unclear what level of scrutiny the proposed Meggitt takeover will attract from the government.

Among the commitments is a pledge to at least maintain Meggitt’s existing level of research and development expenditure in the U.K. and, subject to normal levels of aerospace industry growth and activity, increase this by at least 20 percent over the next five years.

Among a raft of other commitments, Parker Hannifin said it will maintain existing technology and U.K. manufacturing sites for the benefit of the British government, as well as continue to meet contractual obligations in respect to goods and services supplied to or for the benefit of the government.

All of the commitments are time limited.

The U.S. company, best known for its motion and control activities for aerospace, mobile and other industry sectors, has a longstanding position in the U.K., employing more than 2,000 people.

Meggitt had revenues of $2.3 billion in 2020 and employs about 9,000 people globally. Some 46 percent of its revenues are generated from the defense sector.
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