Carlyle Group LP, the U.S. private equity firm, said it walked away from a potential bid for Chemring Group Plc after a review of the defense company, which has repeatedly failed to meet earnings targets in recent months.
“Carlyle today confirms that it does not intend to make an offer for Chemring,” the Washington, D.C.-based private equity firm said in a statement, without citing the reasons. Chemring fell as much as 16 percent in London trading.
Negotiations that were extended twice since they first became public on Aug. 17 had been overshadowed by two target downgrades by Chemring and the surprise ouster of Chief Executive Officer David Price last month. Chemring said today after Carlyle pulled out that it will continue to feel the strain from governments cutting defense budgets.
“Carlyle realized Chemring’s problems were far deeper than expected,” Oliver Sleath, a London-based analyst at Credit Suisse, said in a telephone interview. Another bidder is not likely to emerge in the short term, he said.
Chemring fell as much as 44 pence to 226.90 pence, its lowest since June 2006, and closed at 258.00 pence, valuing the company at 499 million pounds ($797.3 million). The value peaked above 800 million pounds after the talks became public. The Fareham, England-based company said it would provide more information on its business on November 27 over the financial results for the year ended October 31.
“Whilst Chemring continues to face near term challenges resulting from defense budget constraints in its NATO markets, which are not expected to ease in the immediate future, the company has market leading positions and manufacturing expertise in the fields of counter-IED, countermeasures, munitions and pyrotechnics,” Chemring said in a statement.