Meggitt shareholders reach agreement with Parker-Hannifin after TransDigm withdraws acquisition proposal

Aerospace manufacturing specialist Meggitt PLC (Christchurch, Dorset, U.K.) reported on Aug. 2, 2021 that its Board of Directors has voted unanimously to accept an all-cash acquisition offer from Parker Hannifin Corp. (Cleveland, Ohio, U.S.), pursuant to which Parker will acquire the entire issued and to-be issued share capital of Meggitt. The transaction is expected to close in the third quarter of calendar year 2022.

The Parker Hannifin agreement came in the wake of a separate, unsolicited, initial offer by TransDigm Group (Cleveland, Ohio, U.S.) to acquire Meggitt PLC for 900 pence per share — an offer that TransDigm subsequently withdrew.

According to The Guardian, TransDigm’s chairman, W. Nicholas Howley, had previously stated that his company had already arranged financing to facilitate a takeover of Meggitt — TransDigm’s 900 pence/share offer would have valued Meggitt at £7.1 billion — and that the company had been in contact with the U.K. government, offering assurances on jobs and investment equivalent to those given by Parker. Ultimately, however, TransDigm withdrew its offer because it was unclear it would be able to secure a high enough return on its investment.

“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 a share would meet our longstanding goals for value creation and investor returns,” Howley said, as reported by The Guardian and PRNewswire.

It was reported by Meggitt, around the time of TransDigm’s withdrawal that the aerospace company had engaged on a constructive basis with TransDigm and its advisers and provided it and Parker with equivalent access to both confirmatory due diligence information and management. Moreover, in response to a request from TransDigm, further due diligence information had been provided to both parties after the announcement of Parker’s cash offer for Meggitt.

“We are pleased that our recommended acquisition has been approved by Meggitt’s shareholders,” said Parker chairman and CEO, Tom Williams in a September announcement. “We are confident the combination of Meggitt and Parker creates a world-class provider of engineered aerospace solutions, enabling us to advance next-generation civil and military aerospace programs, invest in R&D to develop innovative and sustainable technologies and create opportunities for team members.”

Parker has said it would keep Meggitt’s U.K. headquarters in Coventry and maintain the number of employees in its R&D, product engineering and manufacturing operations the same. It also said it would ensure most of the company’s board are U.K. nationals, as well as increase R&D expenditure by a fifth during the next five years. However, Williams has confirmed that the company would expect to cut jobs in areas not protected by the legal guarantees.

“We understand the importance of a strong cultural fit in creating and nurturing successful organizations. The legally binding commitments we offered alongside our recommended offer underline our intention to be a responsible steward of Meggitt, and we are engaged with the UK government to finalize the commitments. Bringing together the talent, skills and operational best practices from Meggitt and Parker will create a stronger value proposition for our customers, shareholders, employees and communities,” Williams concluded.