(Bloomberg) — U.K. Business Secretary Kwasi Kwarteng is taking an active interest in the agreement by Parker-Hannifin Corp. to buy the British defense and aerospace manufacturer Meggitt Plc, a person familiar with the matter said, suggesting ministers may seek more reassurances on preserving jobs.
Meggitt is one of the few remaining U.K.-based civil aerospace and defense companies, and as such, Kwarteng’s Department for Business, Energy and Industrial Strategy and the Ministry of Defence are working to assess the transaction in more detail, according to the person, who requested anonymity talking about a commercial deal.
No decision has been taken to intervene at this stage in the 6.3 billion-pound ($8.8 billion) transaction, the person said. Kwarteng wants further clarity from Parker-Hannifin and Meggitt, including on their long-term intentions and their plans to protect jobs and U.K. operations, the person said.
“While commercial transactions remain primarily a matter for the parties involved, the government is closely monitoring the proposed acquisition of Meggitt by Parker-Hannifin,” the government said in an emailed statement on Monday. It said Kwarteng has powers to intervene in mergers and takeovers “which raise national security concerns.”
Parker-Hannifin has agreed to make a number of legally binding commitments, including protecting engineering and direct manufacturing headcount, it said in an email. The company “intends to agree the form, nature and detail (including duration) of these commitments” in talks with the government and others.
The deal is the latest example of U.S. buyers eyeing U.K. aerospace. Cobham Ltd., the U.K. defense contractor that was acquired by U.S. private equity firm Advent International Corp. in early 2020, last month made a 2.6 billion-pound buyout approach for Ultra Electronics Holding Plc. The government scrutinized the first Cobham deal and said it would do the same for the Ultra proposal.
U.K. Government Monitors Cobham Buyout of Defense Firm Ultra
Under the Enterprise Act 2002, Kwarteng has quasi-judicial powers to intervene in mergers and acquisitions on national security grounds. The new National Security and Investment Act, which widens those powers and allows for retrospective interventions, comes into force on Jan. 4.
Shares of Meggitt surged the most on record after the 170-year-old company said its board would recommend the 800 pence-per-share offer, 71% above Friday’s closing price.
Parker-Hannifin Chairman and Chief Executive Officer Tom Williams said on a call with journalists Monday that the company was committed to protecting R&D spending at Meggitt for the next five years, conceding that the company’s other guarantees, including pledges to maintain technology and manufacturing in the U.K., are only valid for one year.
The guarantees mean a “significant proportion” of Meggitt’s U.K. jobs are protected, he said, while declining to give a specific figure. U.K. officials will want additional safeguards and fresh guarantees from the U.S. acquirer, the person familiar said.
(Adds company comment in fifth paragraph.)
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