Meggitt Says Open to Bids at Right Price, Sending Stock Soaringby
U.K. aerospace supplier long-touted as deal target by analysts
CEO Young says his prime focus is on shareholder returns
Meggitt Plc Chief Executive Officer Stephen Young said the U.K. supplier of aircraft wheels and brakes would be receptive to takeover offers that are to the benefit of investors, sending the stock to its biggest gain in seven years.
“If somebody is there at the table and came with a big enough check, we’d have to listen to them,” Young said in a telephone interview Tuesday. “My focus is on return for shareholders.”
Meggitt rose as much as 13 percent, the biggest intraday advance since Oct. 30, 2008, and traded up 45.40 pence, or 12 percent, at 431.50 pence as of 11:50 a.m. in London, giving a market value of 3.35 billion pounds ($4.7 billion).
Goldman Sachs, Deutsche Bank and Credit Suisse analysts all last year named Bournemouth-based Meggitt as an attractive bid target as the stock slumped 28 percent in 12 months amid weak demand, with Honeywell International Inc. and United Technologies Corp. suggested as possible buyers.
Young, Meggitt’s CEO since 2013, said in August that the company had been “near the top of the takeover-target list” for all of the 13 years he’d been there, adding: “I’ll let you read between those lines.”
Meggitt shares tumbled 24 percent on Oct. 28 in their biggest intraday drop since 1992 as earnings were hurt by lower-than-expected sales of aircraft spares, program deferrals and a softening market for its energy business.
Young said Tuesday he’s cutting 100 more jobs, taking the total to 400, mainly at the Heatric energy arm. He spoke after Meggitt reported a 6 percent drop in underlying operating profit last year to 325.5 million pounds, in line with analyst estimates.
Meggitt said the mid-term outlook for civil aerospace revenue remains robust and that the defense outlook is improving, aided by military training contracts. The energy unit’s sales will continue to decline, hobbled by the low oil price.
The company’s own acquisitions program will slow this year, Young said, following deals including a $200 million purchase of Cobham Plc’s composites business that lifted debt 83 percent to 1.05 billion pounds. Its next bond repayments are due in 2017.