The British government has opened a formal investigation into the planned £6.3bn takeover of Meggitt, the aerospace and defence group, by a US rival, citing national security concerns.
On Monday, UK business secretary Kwasi Kwarteng issued a so-called “intervention notice” after reviewing advice from officials about the impact of Parker Hannifin buying the Coventry-based group.
Meggitt is one of the few remaining UK-headquartered civil aerospace and defence companies and is considered by the government as a “critical supplier” to large contractors such as BAE Systems and Rolls-Royce. Kwarteng had previously signalled that the government was taking an “active interest” in the deal.
It is the second time in three months that the business secretary has intervened in a foreign takeover of an aerospace and defence group, underlining the government’s concern over the recent swath of buyers targeting UK specialists. In August, Kwarteng opened a formal investigation into a takeover of Ultra Electronics by Cobham, which is owned by US private equity group Advent International.
Under the Enterprise Act 2002, the business secretary can intervene in mergers and takeovers on grounds of national security, financial stability and media plurality. The CMA has until March 18 next year to report back to Kwarteng.
Tom Williams, chief executive and chair of Parker Hannifin, told the Financial Times last month that the company was open to talking to UK ministers to ease concerns over the impact of the deal on Meggitt’s workforce and research and development.
The US industrial group, whose takeover was overwhelmingly backed by Meggitt shareholders last month, had agreed to make a number of legally binding commitments, including to at least maintain R&D spending at the UK company for the next five years.
Other pledges, however, including ones to maintain technology and manufacturing in the UK, would expire after 12 months.
MPs and unions have warned that the UK risks losing control of industrial assets that are crucial to the armed services.
Parker Hannifin said in a statement that it looked forward to “engaging with the UK government” and “bringing the review of the transaction to a satisfactory conclusion”. It added that it still expected the deal to close in the third quarter of next year.
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