Meggitt tumbles as TransDigm says it won't make an offer

Meggitt shares tumbled on Tuesday after US aerospace manufacturer TransDigm said it does not plan to make an offer for the London-listed defence and aerospace engineer following "quite limited" due diligence information, clearing the way for Parker-Hannifin.

TransDigm chairman W. Nicholas Howley said: "We have long admired and studied the Meggitt business and believed that a combination between the two companies could provide value to investors of both companies.

"However, based on the quite limited due diligence information that was made available and the resulting uncertainties, TransDigm could not conclude that an offer of 900p per Meggitt share would meet our long-standing goals for value creation and investor returns."

Howley said that TransDigm and its advisers put "substantial" time, effort, resources and expense into evaluating a potential transaction.

"We reached a memorandum of understanding with the Meggitt Pension Plan trustees, arranged the necessary financing for the acquisition which we anticipated would position us roughly in the range of leverage levels that we have used historically for larger acquisitions, and communicated our willingness to make commitments to HM Government comparable to those offered by the other bidder for Meggitt.

"However, consistent with our disciplined approach to capital allocation, we make acquisitions only when we see a clear path to achieving our investment return goals with a reasonable degree of certainty."

Meggitt announced last month that it had received an unsolicited takeover approach from TransDigm. This came just a week after the company agreed to be bought by US rival Parker-Hannifin for £6.3bn, or 800p a share.

In a separate statement on Tuesday, Meggitt insisted that it had engaged on a constructive basis with TransDigm and provided it and Parker-Hannifin with the equivalent access to both confirmatory due diligence information and management.

"In addition, in response to a request from TransDigm, further due diligence information was provided to both parties after the announcement of Parker's cash offer for Meggitt," it said.

The company said its directors continue to recommend the offer from Parker-Hannifin, as it represents "an attractive proposition for Meggitt's shareholders and for its broader stakeholders, including its employees, pension schemes and customers, together with HM Government, for the long-term".

Meggitt shareholders are due to vote on the Parker offer on 21 September.

At 1535 BST, Meggitt shares were down 12% at 739.02p.