Eliott Effect ?
Meggitt (LONDON:MGGT) is exploring a sale of its target systems business alongside Stephens, said two sources familiar with the situation.
The UK-based aerospace components company and Stephens did not return calls for comment.
This news service reported in March that Meggitt’s target systems business, which provides unmanned aerial, marine and ground targets, scoring systems and payloads for weapon performance measurement and personnel training, could be an acquisition target for peers.
Both sources said books have been distributed to prospective buyers, adding that Meggitt’s target systems business has around GBP 30m (USD 39.5m) in annual revenue. Indications of interest are due in early September, one of the sources said. Management presentations are expected to take place later the same month, the two sources added.
Meggitt’s target systems business, which operates from Canada and the UK, is part of Meggitt’s equipment group. Meggitt has four other divisions: Aircraft Braking Systems, Control Systems, Polymers & Composites and Sensing Systems. In 2015, Meggitt Defense Systems in the UK and Meggitt Training Systems in Canada combined to form Meggitt Target Systems.
The March report noted that Meggitt’s target systems unit, whose main focus is on the defense market, could be viewed as non-core based on Meggitt’s recent shift to focusing on the commercial aerospace side of its business.
Meggitt made three acquisitions in commercial aerospace last year. In January 2015, it purchased control systems maker Precision Engine Controls from United Technologies for USD 44m. It subsequently acquired Cobham’s and EDAC Technologies’ composites businesses for USD 200m and USD 340m, respectively.
One of the sources named European defense companies Leonardo Finmeccanica (BIT:LDO), BAE Systems (LON:BA) and Airbus Group (EPA:AIR) as possible acquirers for Meggitt’s target systems business. The March report also pegged Chemring (LON:CHG) as potential suitors as the UK-based company focuses on the defense electronic warfare market.
Last November, Esterline announced it reached an agreement with Chemring to sell certain assets of Wallop Defence Systems, which makes countermeasure products used by military forces in the protection of aircraft from missiles.
Earlier this month, activist investor Elliott Management increased its stake in Meggitt to 5.2%, according to a stock exchange filing.
At around the same time as the filing, a report by The Daily Telegraph said the move is fuelling takeover speculation about the company.
In late February, Meggitt CEO Stephen Young was reported to have said he would be willing to entertain offers for the company.