UK defence and aerospace technology firm Meggitt was the best performer on the London Stock Exchange (LSE) last week, according to the latest weekly market performance report from Saxo Markets. Here is a look at why the shares of Meggitt were on an absolute tear.
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What is Meggitt and what is up with its shares?
Coventry-based Meggitt designs, manufactures and supplies components and sub-systems for aerospace and defence markets, and selected energy markets.
According to Saxo Markets, the company’s shares were up 54.43% last week, making it the biggest gainer on the LSE.
Why did the price of Meggitt shares rise?
The rise of the Meggitt share price follows the announcement that the company has agreed to be acquired by American industrial firm, Parker-Hannifin.
The deal is valued at £6.3 billion and translates to about 800p per share in cash. This represents a 71% premium over the previous week’s closing price. It’s also higher than the company’s pre-pandemic high of 701.8p.
The promise of such a high premium on the company’s stock price was enough to trigger strong investor demand for its shares and cause their price to soar.
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What is the future for Meggitt?
Parker-Hannifin’s bid for Meggitt is the latest in a slew of takeover bids for UK companies by foreign firms.
Just a few weeks ago, Cobham, which is owned by US-based private equity firm, Advent International, made a £2.6 billion bid for defence and aerospace supplier Ultra Electronics, causing the latter’s share price to surge.
And before that, supermarket chain Morrisons announced that it had accepted a £6.3bn takeover bid by a consortium led by US private equity firm Fortress Investment Group, not long after turning down an offer from a different American firm.
However, unlike Morrisons’ deal, which should be relatively straightforward, the sensitive nature of Meggitt’s and Ultra Electronics’ businesses means that there may be a few more regulatory hurdles to clear.
The UK government has already stated that it is keeping a close eye on Meggitt’s deal. So, the deal’s fate remains uncertain. Having said that, Parker-Hannifin has made a number of legally binding commitments that may help in getting the deal approved.
These include keeping all manufacturing jobs and facilities, as well as its headquarters within the UK, and maintaining current levels of research and development spending.
Meanwhile, Meggitt’s executives have expressed great optimism about the deal and what it could mean for the company. Chairman Sir Nigel Rudd said the deal would “significantly accelerate and de-risk” Meggitt’s growth strategy.
What other companies performed well on the LSE?
Apart from Meggitt, other companies that also posted notable gains on the LSE last week include:
- Cairn Energy- 28.50%
- Bank of Georgia- 10.27%
- Rolls-Royce Holdings- 10.02%
- FirstGroup- 9.95%
- Airtel Africa- 9.09%
- Vectura Group- 8.61%
- Abcam- 8.27%
- London Stock Exchange- 7.19%
- Unite Group- 6.72%
- Reach- 6.43%
How can I buy shares in Meggitt?
Meggitt is a publicly traded company, and so its shares are available on most share-dealing platforms. If you don’t have a share dealing account, we’ve compared and rated some of the top providers of share dealing accounts in the UK to help you make a good choice.
Alternatively, you can invest in Meggitt using a stocks and shares ISA, like Saxo Markets Stock and Shares ISA. An ISA is essentially a tax wrapper that shields your investment’s gains and income from tax, meaning that you get to keep more of your returns.
Just bear in mind that investing is inherently risky. Your investments can fall as well as rise and you could get back less than you originally invested. So do your homework beforehand and only invest if you are confident that the investment fits with your investment strategy.
Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
