Jobs threat as British engineering firm Meggitt agrees £6.3bn takeover by US tech giant Parker-Hannifin

Job losses are threatened at a UK defence and aerospace technology firm after it agreed a £6.3bn takeover by an American rival.

It comes after Meggitt confirmed an offer from the US engineering technology giant Parker-Hannifin, which it said put a 70% premium on the share value of the FTSE 250 company.

Under the agreement, Parker has committed to keep Meggitt’s UK headquarters in Coventry and maintain the workforce involved in research and development, product engineering and direct manufacturing.

London Stock Exchange
Shares in the company soared following the announcement of the proposed buyout

It also said it would increase by at least 10% the number of apprenticeships.

But raising the prospect of job cuts in other parts of the company, the takeover deal states: “Whilst protecting and increasing investment in these areas, Parker sees the benefit of reviewing the ways in which the operations of the combined group can be further improved, which may impact employment roles within the organisation.”

It added: “Parker anticipates overlap between the two businesses, particularly in central corporate and support functions and a reduced need for roles currently supporting Meggitt’s status as a public listed company at Meggitt’s UK headquarters.

“The acquisition may give rise to operational economies of scale and opportunities for commercial benefits, which will be assessed as part of the evaluation and may result in headcount reductions or relocation of Meggitt employees.”

No details were provided on the scale of any potential losses.

Parker also said it would continue Meggitt’s already announced consolidation plan, that will include site closures and “which may result in headcount reductions or relocation of combined group employees”.

But the firm added: “These reductions will not include employees engaged in R&D, product engineers, direct manufacturing labour or apprentices in the UK.”

It comes after a period of turbulence during the coronavirus pandemic, with Meggitt cutting 1,800 jobs last year across its global business after COVID-19 hit the travel sector.

The company also revealed on Monday that it had swung to a profit for the first half of 2021 as it continued its recovery.

Shares in the company soared by 60% in early trading on Monday following the announcement of the proposed buyout.

The deal values Meggitt at 800p per share, which at the end of trading on Friday stood at 469.1p.

Tom Williams, chairman and chief executive of Parker-Hannifin, said: “We are committed to being a responsible steward of Meggitt and are pleased our acquisition has the full support of Meggitt’s board.

“We fully understand these responsibilities and are making a number of strong commitments that reflect them.

“During our longstanding presence in the UK we have built great respect for Meggitt, its heritage, and its place in British industry.”

Meggitt chairman Sir Nigel Rudd said: “Meggitt is one of the world’s foremost aerospace, defence and energy businesses, leading the market with a strong portfolio of technology and manufacturing capabilities, and holding a significant amount of intellectual property.

“Whilst Meggitt is currently pursuing a strong, standalone strategy which will deliver value to shareholders over the long-term, Parker’s offer provides the opportunity to significantly accelerate and de-risk those plans, while continuing to deliver for shareholders.”

Meggitt is the second British defence firm in recent weeks to become a takeover target for a US-backed company, following Cobham’s bid for Ultra Electronics.

Cobham has said it would offer “appropriate national security undertakings” to the UK government.

Meggitt employs more than 9,000 people in 14 countries in its three major divisions.

Source link