Ultra (LON: ULE) and Meggitt (LON: MGGT) shares soar on takeover announcements

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Ultra (LON: ULE) and Meggitt (LON: MGGT) shares soar on takeover announcements

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 Ultra (LON: ULE) and Meggitt (LON: MGGT) shares soar on takeover announcements
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Highlights 

  • Ultra Electronics Holdings plc entered into a £2.6 billion takeover agreement with Cobham Ultra Acquisitions Limited.
  • Post takeover, each Ultra Electronics shareholder will receive £35.00 in cash, 40% more than Ultra’s record high share price.
  • Meggitt announced acquisition by the US-based Parker-Hannifin for £6.3 billion ($8.8 billion).

Two of the United Kingdom’s defence giants – Ultra Electronics Holdings Plc (LON: ULE) and Meggitt Plc (LON: MGGT) announced acquisitions by foreign firms. Although the acquisitions demonstrate the rising American interest in Britain-based aerospace and defense firms, the foreign acquirers have assured the UK government no threat to national security and protection of existing UK workforce in these organisations, and creation of new manufacturing and engineering jobs.

Here we take a look at the details of these deals and their impact on the shares of Ultra Electronics and Meggitt.

Cobham-Ultra Electronics acquisition

Ultra Electronics, a defence, critical detection & control, and security company entered into a £2.6 billion takeover agreement with Cobham Ultra Acquisitions Limited, a wholly owned subsidiary of Cobham Group Holdings Limited. Ultra specialises in advanced detection systems for military forces to identify emerging threats. The acquisition move would aid both businesses to complement each other through design, engineering, and manufacturing.

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As per the acquisition agreement, Cobham assured the UK Government that its acquisition of Ultra Electronics would not be a concern of national security. Additionally, Cobham also assured that it would invest in protecting the existing Ultra’s UK workforce, and create new manufacturing and engineering jobs, and maintain the UK-based headquarters. The deal would ensure protecting national security, and continuity of supply of critical capabilities in the UK.

Post takeover, each Ultra Electronics shareholder will receive £35.00 in cash, 40% more than Ultra’s record high share price. In addition, Ultra’s shareholders will also be entitled to receive an interim dividend payout of 16.2 pence per share, due to be paid on 17 September 2021.

Following the news of the acquisition, Ultra Electronics’ shares were trading at GBX 3,316.00, up by 4.87 per cent as of 10.44 AM on 16 August 2021, and had a year-to-date return of 60.04 per cent. The market cap of the company stood at £2,252.89 million.

Parker-Hannifin-Meggit take over deal

Another defence company, Meggitt inked an agreement to be acquired by the US-based Parker-Hannifin in a £6.3 billion ($8.8 billion) deal on 2 August 2021. On 11 August 2021, Meggitt had reported that it received a £7 billion possible cash acquisition offer from TransDigm. The US-based aircraft components and systems company TransDigm announced an acquisition value of 900 pence per share, which was higher than Parker-Hannifin's 800 pence per share offer. The UK Takeover Panel announced that Meggitt’s suitor TransDigm had to finalise the takeover bid before 14 September 2021.

On 16 August 2021, the supplier of aeroplane wheels and brakes - Meggitt announced its acquisition by Parker-Hannifin.  The Takeover Panel also announced that the process for Parker-Hannifin's offer continues, with Meggitt announcing the publishing of documents concerning the offer on 16 August 2021, and the date for the shareholder vote has been set on 21 September 2021. Parker-Hannifin assured the UK government on national security and jobs. The panel also said that the deadline would not be applicable in case a third party other than TransDigm rushes to make a fresh offer for Meggitt.

Meggitt’s shares were trading at GBX 816.60, down by 0.29 per cent as of 11.36 AM on 16 August 2021, and it had a one-year return of 175.84 per cent. The market cap of the company stood at £6,339.50 million.

CONCLUSION:

The latest takeover announcements of UK-based aerospace and defence firms Ultra Electronics and Meggitt by US-based investors, demonstrates the tremendous American appetite for specialist UK based defence firms. Growing foreign interest in these firms, and attractive dividend payouts and returns, are expected to keep the interest alive till the deal completion.

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