Bain Capital targets £1bn listed defence group Chemring
One of the world’s largest private equity investors has made an approach to buy Chemring, the FTSE 250 defence group – the latest in a continuing slew of takeover bids for London-listed companies.
Sky News has learnt that Bain Capital has lodged at least one proposal to acquire Chemring in recent weeks.
One source close to the situation suggested that an initial offer may have been tabled at 390p-a-share, a modest premium to the 356p at which the stock was trading on Monday morning.
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They added that a second offer had been under preparation by Bain, although it was unclear whether it had been submitted to the company’s board, which is chaired by the former Meggitt and Rolls-Royce Holdings executive Tony Wood.
Another insider said there was uncertainty about how aggressively Bain was prepared to pursue the company.
Chemring is heavily exposed to the fortunes of the defence and aerospace sectors, making high-tech products and providing services to organisations such as NASA and Elon Musk’s SpaceX.
Its defence products include infrared devices aimed at repelling enemy attacks.
It employs roughly 2,700 people, according to its most recent results announcement published in mid-December.
Shares in Chemring fell sharply on the day of that statement after it disclosed the impact on profit margins of problems at a US factory.
That was despite the news of a record order book, as defence manufacturers benefit from an explosion in spending by governments in the wake of Donald Trump’s election for a second term as US president.
NATO members have committed to increase defence spending, although there remains some uncertainty about the extent to which those commitments are deliverable.
Michael Ord, Chemring’s chief executive, described its outlook as “increasingly robust”.
“A lot of commentators will say the age of globalisation is over and we are now in an age of great power competition, certainly in our conversations with our customers that feels the case,” he added.
Nevertheless, its stock is broadly flat on a year ago.
Chemring has a market capitalisation of about £975m, meaning that a typical takeover premium of roughly 30% would mean a buyout valuing its shares at about £1.3bn.
In recent months, listed companies including Learning Technologies Group, which agreed to be taken private by the buyout firm General Atlantic, have been targeted by buyout firms, while the likes of BP and ITV are at the centre of mounting bid speculation.
Britvic and Royal Mail’s parent company, International Distribution Services, were both taken over late last year.
Part of the trend is being driven by the growing prominence of activist investors on UK company share registers, while London-quoted stocks remain cheap by comparison with international peers.
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Elsewhere, Amsterdam-listed Just Eat Takeaway, which recently cancelled its London listing, recommended a €4.1bn takeover offer from the technology investor Prosus on Monday morning.
Bain Capital’s private equity portfolio includes companies such as the insurance group esure, which is up for sale, and a stake in Sir Richard Branson’s cruises operator, Virgin Voyages.
On Monday morning, Bain Capital and Chemring both declined to comment.