UK Stops US Firm Buying British Defence Contractor on 'National Security Grounds'
© AP Photo / Petros KaradjiasIn this Thursday, Sept. 22, 2016 photo, a Typhoon aircraft takes off from RAF, Akrotiri, British air forces for a mission in Iraq.
© AP Photo / Petros Karadjias
This is the second acquisition of a UK-based defence contractor, in which the Government has intervened. The last time it stopped a deal was when American private equity firm Advent wanted to buy Ultra Electronics.
UK Business Secretary Kwasi Kwarteng has issued a public interest intervention notice stopping British defence company Meggitt from being bought by US rival, Parker Hannifin, after the $8.7 billion deal was approved by shareholders. Kwarteng said that the intervention was made on "national security grounds".
"The Competition and Markets Authority (CMA) will prepare a report on the proposed transaction".
Britain's Business Secretary noted that the Competition and Markets Authority (CMA) must complete its assessment of the deal and either clear or block it by the end of 18 March 2022. Under a 2002 law, the Government has the authority to block any merger or acquisition if it believes it might threaten national security.
Meggitt, the company in question, largely relies on orders from private aviation companies, but also makes parts for the Typhoon fighter jets used by the Royal Air Force. Meggitt also has a contract to train British soldiers in small-arms equipment. Parker Hannifin promised it will respect the acquired company's obligations and contracts, and said it hoped that the deal will be cleared and closed in 2022.
"We look forward to engaging with the UK government. We expect that the transaction will close in the third quarter of 2022."
This is the second deal that the Government has prevented this year. Last time it insisted on a review of the offer by US private equity firm Advent to buy UK-based defence contractor Ultra Electronics, which not only has Royal Navy contracts, but also gets a great deal of income from contracts to provide McDonnell Douglas AV-8B Harrier II ground attack jets with support equipment.
16 August 2021, 19:00 GMT
These two deals come in the wake of the Frazer-Nash Consultancy - which works in the sphere of nuclear submarines and weaponry for the Royal Navy - being sold to America's KBR aerospace group. The trend for American rivals to buy British defence contractors has reportedly unsettled Downing Street.