The offer on Coventry-based Meggitt on Monday would give shareholders 800p per share in cash, which is a 71% premium over Friday’s closing price.
This is the second time in a few days that Kwasi Kwarteng, the British business secretary who has the power to intervene in takeovers for national security reasons, has “actively” taken an interest in a takeover plan.
Kwarteng announced last week that he could intervene in Cobham’s proposed £ 2.6bn offer, backed by US private capital, for UK defense group Ultra Electronics after concerns for reasons security forces have surfaced.
The move by Cleveland-based Parker prompted Meggitt’s share price to rise 55% to 728p on Monday afternoon in London, breaking its previous record just below 700p.
Kwarteng is reportedly asking the two companies for more details on their long-term intentions and plans to protect jobs and local operations in Britain.
The offer is the latest in a series of US buyers targeting UK companies, particularly those in the defense sector, raising concerns among officials.
No decision to intervene in the Meggitt transaction has been made, but Kwarteng is reportedly determined to ensure that the deal, involving one of the few UK-based civil aerospace and defense companies, works. in the national interest.
The Ministry of Business, Energy and Industrial Strategy, BEIS, did not immediately respond to a request for comment.
Meggitt, whose roots can be traced back to the invention of the world’s first altimeter for hot air balloons in 1850, is considered by the government to be a “key supplier” to BAE and Rolls-Royce.
To allay potential concerns, Parker made a series of commitments to the UK government, including honoring contracts, ensuring the majority of board members are UK nationals and increasing research spending. and development in the country by 20% over the next five years.
Along with the legally binding commitments made by Parker, Meggitt’s board of directors supported the offering due to the large premium and improved scale.
Sir Nigel Rudd, Chairman of Meggitt, said: “The Meggitt Board of Directors is confident that Parker will be a responsible steward of Meggitt and unanimously recommends Parker’s offer.
Tom Williams, President and CEO of Parker, told the Financial Times: “We are now reaching out to government officials as we speak. He said he was confident the talks would go well since Fortune 250 was not a private equity firm but a “strategic buyer” that was already supplying the British military.
UK government officials say that while Parker has pledged to keep some of Meggitt’s 2,300 employees in the UK – in R&D, product design and direct manufacturing – it did not cover all jobs.
According to government officials, Kwarteng’s team want additional safeguards and guarantees over “other new opportunities” in the UK; A more in-depth assessment of the deal will now be completed by BEIS and Defense Ministry officials.
Under the Enterprise Act 2002, the Business Secretary has quasi-judicial powers to intervene in mergers and acquisitions for reasons of national security, financial stability and plurality of the media. A broader national security and investment regime comes into force in January 2022.
The US motion and control tech specialist has a habit of buying UK companies, spending just under $ 970 million on a series of deals, the most significant of which was the takeover of Domnick Hunter in 2005.
Howard Wheeldon, independent defense analyst, said: “Meggitt’s future is best served if the company is part of a strong international organization.
The offer came as Meggitt reported half-yearly pre-tax profits of £ 49million, reversing losses a year ago, on income of £ 680million. The company was hit hard by the slowdown in civil aviation, but the second quarter showed signs of improvement in the first three months of the year.