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Chemring Drops as Ousting of Chief Taken as Sign Deal Talks Over

Chemring Group Plc, the target of a takeover approach by Carlyle Group LLP, dropped the most in two months in London after investors took the ousting of its chief executive as a sign deal talks are collapsing.

Chemring dropped as much as 9.8 percent to 312.4 pence, the most since Aug. 28, valuing the Fareham, England-based company at 613.5 million pounds ($981 million). The board opted to replace long-serving David Price with Mark Papworth.

“The move potentially flags that the deal is collapsing,” Oriel analyst Guy Brown said in a note today. “It would appear odd to appoint a new CEO with the belief the group is going to be taken over within a matter of weeks.”

Papworth will take over running the maker of munitions and aircraft protection-equipment on Nov. 5, Chemring said in a statement today. Four days later is a deadline for takeover talks with Carlyle. After announcing the approach Aug. 17, discussions have been extended twice, during which time Chemring has cut its outlook for profit.

Papworth oversaw an overhaul of Wood Group Plc, and has held an executive position at the energy unit of Rolls-Royce Holding Plc. David Price stood down “with immediate effect,” the company said.

“It could be a very short tenure for Mark Papworth if the deal closes on or before the Nov. 9 ‘Put Up or Shut Up’ deadline but maybe he has come in on this basis,” Oriel’s Brown said.

Chemring shares, reiterated an “Add” at Oriel, declined 8.8 percent to 316 pence as of 9:05 a.m. Strong management and a “good recovery story” highlights a “fundamentally sound business” and a buying opportunity for investors, Brown said.

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