TransDigm drops £7bn plan to take over defence firm Meggitt

Meggitt had already agreed an offer from US group Parker Hannifin before TransDigm showed interest.

Union flag themed Typhoon
Union flag themed Typhoon

One of two potential bidders for UK defence contractor Meggitt has withdrawn from the multibillion-pound battle to buy the business.

TransDigm, which is listed on the New York Stock Exchange, said it would not make a firm offer for Meggitt, after floating a potential £7 billion bid last month.

It will end a period of uncertainty for Meggitt’s board, which had already agreed a smaller deal with another US company before TransDigm got involved.

TransDigm’s chairman, W. Nicholas Howley, said: “We have long admired and studied the Meggitt business and believed that a combination between the two companies could provide value to investors of both companies.

“However, based on the quite limited due diligence information that was made available and the resulting uncertainties, TransDigm could not conclude that an offer of 900 pence per Meggitt share would meet our long-standing goals for value creation and investor returns.”

He said that the company had put time, effort and resources into the potential deal, and had reached an understanding with Meggitt’s pension plan trustees.

“However, consistent with our disciplined approach to capital allocation, we make acquisitions only when we see a clear path to achieving our investment return goals with a reasonable degree of certainty,” Mr Howley said.

The news was devastating for Meggitt’s share price, which plummeted following the announcement.

The board will now have to go back to Parker Hannifin, the US group with which it had earlier agreed a deal of 800p per share.
Meggitt said: “The directors of Meggitt continue to recommend unanimously the offer by Parker to Meggitt shareholders announced on 2 August 2021.

“The board of Meggitt believes the Parker offer continues to represent an attractive proposition for Meggitt’s shareholders and for its broader stakeholders, including its employees, pension schemes and customers, together with HM Government, for the long-term.”

A vote is scheduled for September 21.

However, on Tuesday shares dropped 13% from around 850p to just 730p, indicating investors are uncertain whether the Parker Hannifin deal will go ahead.

The share price is still considerably higher than the approximately 470p at which Meggitt was trading in July, before either bid was revealed.

The potential takeover of Meggitt, and a bid for fellow UK defence contractor Ultra Electronics, has caused scrutiny.

The Business Secretary, Kwasi Kwarteng, is reported to have ordered an investigation into whether the takeovers would harm the UK’s national security.

Meggitt makes parts for several aircraft, including military planes such as the Eurofighter Typhoon and F-35.

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