MergerMarket
Meggitt’s (LONDON:MGGT) target systems business is an acquisition target for peers, according to a sector source and sector adviser.
The UK-based aerospace components company declined to comment.
Meggitt’s target systems business provides unmanned aerial, marine and ground targets, scoring systems and payloads for weapon performance measurement and personnel training. The business operates as part of Meggitt’s equipment group.
The sector source estimated revenue of Meggitt’s target systems business at between USD 40m to USD 50m. According to the company’s latest annual report, Meggitt’s equipment group generated revenue of GBP 244m in 2015, down 7.5% from the year prior when it posted GBP 264m in sales.
Meggitt has five divisions: Aircraft Braking Systems, Control Systems, Polymers & Composites, Sensing Systems and Equipment Group. In 2015, Meggitt Defense Systems in the UK and Meggitt Training Systems in Canada combined to form Meggitt Target Systems.
The sector source and sector advisor said Meggitt’s target systems business, whose main focus is the defense market, could be viewed as non-core based on Meggitt’s recent acquisitions and focus 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.
The sector adviser named Chemring (LON:CHG) as a potential acquirer of Meggitt’s target systems business given the UK-based company focuses on the defense electronic warfare market. In 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.
Separately, Meggitt has been in the spotlight as a takeover target following news that Honeywell International (NYSE:HON) and United Technologies (NYSE:UTX) had recently considered a merger. Meggitt has often been speculated as a target for both companies. In late February, Meggitt CEO Stephen Young was reported to have said he would be willing to entertain offers for the company.