The American takeover spree of British businesses gathered pace yesterday as two US firms splashed almost £8 billion in deals with two of the country’s leading engineering groups.
Meggitt, the aerospace group, agreed to a £6.3 billion takeover by its Ohio-based rival Parker-Hannifin while Smiths struck a deal to offload its medical division to TA Associates, the Boston-based private equity group, for net cash proceeds of £1.3 billion.
The Meggitt deal garnered immediate attention from the government, which is taking an “active interest” in the acquisition and may demand extra pledges on jobs and investment.
Parker-Hannifin secured boardroom approval yesterday for its 800p-a-share bid, which valued Meggitt at a 71 per cent premium to Friday’s closing price.
Smiths meanwhile said last night that the sale of Smiths Medical offered “a better outcome for shareholders than a demerger”, which it had been pursuing with plans to list the division separately in the UK.
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Meggitt is based in Coventry and employs 9,000 staff globally, including 2,300 in Britain. It works on military programmes for the BAE Systems Typhoon and Lockheed Martin F-35 fighters and makes sensors, landing gear components and other kit for Boeing and Airbus. Less than 5 per cent of its turnover comes directly from the Ministry of Defence.
Smiths employs about 23,000 people globally and is best known for its engineering and industrial capabilities though it also owns Smiths Medical, which makes respiratory devices and catheters. The medical business is based in Minnesota and employs almost 8,000 people, about 100 of whom are in the UK, with a ventilator assembly site near Luton.
The deals follow last month’s proposed £2.6 billion takeover of Ultra Electronics by Cobham, which was itself taken over by the US private equity group Advent last year. Ultra, like Meggitt, makes components for military aircraft and the proposed sales have prompted concerns over jobs, investment and defence supply chain security.
Kwasi Kwarteng, the business secretary, signalled last week that his department was prepared to intervene in the bid for Ultra because of potential national security concerns. He has not decided whether to subject the Meggitt deal to the same level of scrutiny but is to request further clarity from Parker-Hannifin over its intentions and plans to protect Meggitt’s domestic workforce, sources said. He wants it to provide stronger guarantees on future investments in the UK.
The American group has made a series of commitments in an attempt to win over the government. It has promised to maintain Meggitt’s UK headquarters, ensure the board retains a majority of British nationals and to increase research and development investment in the UK by 20 per cent for the next five years, subject to market conditions. It pledged that British headcount in key operational divisions will remain at “no less than current levels”, although back-office roles are at risk.
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Shares in Meggitt closed 266p, or 56.7 per cent, higher at 735p.
