(Bloomberg) — Parker-Hannifin Corp., the U.S. maker of industrial motion-control systems, agreed to buy the U.K.’s Meggitt Plc for 6.3 billion pounds ($8.8 billion) in cash to strengthen its hand in a rebounding aerospace industry.
The price of 800 pence a share is a 71% premium to Meggitt’s closing price on July 30, and the shares jumped toward that level in London. The premium will make it harder for a rival to jump in, after a string of buyouts of U.K. aerospace and defense firms by U.S. suitors.
The deal would also be the biggest ever for Parker-Hannifin, which has accelerated its buyout activity under Chairman and Chief Executive Officer Tom Williams.
Adding Meggitt will nearly double the size of the company’s aerospace systems unit, it said in a statement. That wouldl position Cleveland-based Parker to better compete in an aviation sector that’s just coming out of its biggest slump in history, as demand for aircraft returns following the coronavirus pandemic.
“We strongly believe Parker is the right home for Meggitt,” Williams said in a statement. “Together, we can better serve our customers through innovation, accelerated R&D and a complementary portfolio of aerospace and defense technologies.”
Meggitt shares jumped 60% to 749 pence at 8:27 a.m. in London. Parker closed Friday at $312.03 in the U.S. With a market value $40 billion, it’s about five times the size of its target.
The deal is the latest example of U.S. buyers eyeing U.K. aerospace. Last month, Ultra Electronics Holding Plc received a 2.6 billion-pound buyout approach from Cobham Ltd., the U.K. defense firm that has been owned by U.S. private equity firm Advent International Corp. since early last year.
Senior Plc, the U.K. supplier of aerospace parts to Boeing Co. and Airbus SE, rejected a buyout offer from Texas-based Lone Star Funds last month as too low.
The government scrutinized the first Cobham deal and said it would do the same for the Ultra proposal. Parker-Hannifin said it would offer commitments to the U.K., including a pledge to continue supplying the government, and maintain existing technology and manufacturing in the country. A majority of Meggitt’s board will continue to be British, it said.
Read more: U.K. Government Monitors Cobham Buyout of Defense Firm Ultra
Parker Hannifin, founded in 1917, has a significant U.K. presence, providing hydraulics, pneumatics to the aerospace, automotive and heavy industry sectors. It is already a defense supplier to the U.K. government.
The U.S. company said one attraction was a business transformation of Meggitt over the past four years. The U.K. company reported 680 million pounds in first-half revenue on Monday.
Meggitt’s origins go back to 1850 under Negretti & Zambra, a scientific instrumentation business which invented the world’s first altimeter for the hot air balloon.
Meggitt shares had been rising on takeover speculation, with a report in May 2021 saying Woodward Inc. was looking at a potential deal. The Times reported this month that a mystery bidder had approached the company.
The U.K. company’s directors intend to recommend unanimously that shareholders vote in favor of the deal at an investor meeting, the statement said.
(Updates with share move, company earnings, added detail on acquisition from second paragraph.)
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