United Kingdom

Meggitt job losses feared in wake of £6.3bn takeover

Mr Williams refused to be drawn on how many jobs would go, saying a “significant number would be protected ... we will evaluate all the talent that has made Meggitt successful and have the best of both companies”.

He asked for Parker to be judged on its track record, saying it had bought 80 businesses over the past 20 years and was a “long-term builder” of businesses.

“We intend to own Meggitt for a very, very long time,” he said, contrasting his company with private equity buyers. “We have a totally different approach. Private equity by its nature buys things and sells part of them. We don’t do that.”

However, Mr Williams was unable to say why he could not offer longer-term guarantees, saying he thought the undertakings were “what we thought appropriate”.

New York-listed Parker, which is worth $40bn, has 55,000 staff worldwide including 2,100 in the UK at 18 sites. 

The Business Secretary, Kwasi Kwarteng, is understood to be “monitoring the situation closely”, the second time in a fortnight he has spoken out about potential acquisitions of key UK industrial companies.

The minister is also looking at the proposed £2.6bn bid for Ultra Electronics from Cobham, which is owned by US private equity group Advent.

Mr Kwarteng is said to be taking an “active interest” in both deals to see how they will protect UK jobs and the country’s industrial base.

Government officials are seeking to secure assurances about both businesses being able to secure future business in the UK in the event they fall into foreign ownership.

The offer, which sent Meggit shares soaring 56pc to 735p, is just the latest in a run of offers from US buyers for British businesses. 

Ultra Electronics is in the sights of Cobham, which is owned by US private equity investor Advent, with the British company saying it was likely to back the offer which is at a premium of 63pc.

Meggitt chairman Sir Nigel Rudd backed the offer: “The board of Meggitt is confident that Parker will be a responsible steward of Meggitt and unanimously recommends Parker’s offer.”

Confirmation of the offer - which had been rumoured but not substantiated for over a week -caught out some hedge funds.

According to public records, Citadel had “shorted” 1.6pc of Meggitt's shares, betting that they would fall after edging up as deal rumours swirled.

The approach is just the latest in a swathe of approaches from US companies for British-listed industrial firms. Senior, which makes aerospace and car parts, rebuffed a £840m offer from US private equity company Lone Star in June.

Supermarket Morrisons is also the subject of a bidding war from US buyout groups 

Parker's offer for Meggitt was revealed alongside Meggitt’s interim results which showed a 26pc fall in revenues to £680m following lower demand for air travel due to the pandemic.

However, it posted a £33.6m pre-tax profit, reversing the £36m loss in the first six months of last year as the impact of restructuring kicked in.

The US company buying Meggitt for £6.3bn has guaranteed jobs at the defence contractor for only one year despite pledging to be a "responsible steward”.

The board of the FTSE 250 company has recommended the 800p a share from Parker Hannifin, which represents a 71pc premium to Friday's 469p closing price but is only 15pc higher than their pre-pandemic level.

Meggitt makes components and sub-systems such as brakes used on more than 70,000 civil and military aircraft worldwide. A quarter of its 9,000 staff are in the UK across 39 sites. 

Parker said it would offer legally binding commitments to help secure the deal such as keeping the combined business’s headquarters in the UK, maintaining all existing divisions and R&D, product engineering and manufacturing staff levels.

However, Tom Williams, the Parker chief executive, conceded the promises were only valid for a year, apart from those concerning R&D that would last for five.

He called the undertakings “the best in class, the right things to run the business successfully in the UK. These are serious commitments that people should feel comfortable with.”

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