Pensions are set to be a key battleground in the war to take control of defence firm Meggitt.
The Coventry business is being circled by American predators – engineer Parker-Hannifin and private equity outfit Transdigm.
The tussle has outraged MPs and military figures who want Meggitt to retain its British roots amid fears of a hollowing out of the UK defence industry.
Pensions row: Defence firm Meggitt is being circled by American predators – engineer Parker-Hannifin and private equity outfit Transdigm
But one pensions expert has warned that retirement pots will increasingly become a deciding factor – meaning pension commitments could decide Meggitt’s future.
Alex Waite, an independent pensions consultant at LCP which is advising firms such as G4S as well as Parker-Hannifin as it pursues Meggitt, said pension trustees are becoming wary of the amount of debt involved in takeovers.
Trustees of the Morrisons pension schemes have sounded the alarm over the proposed £7billion deal for the supermarket chain.
From this autumn, company directors and pension trustees can be jailed or fined up to £1million for doing anything which ‘puts pension benefits at risk’.
Higher offer for Augean
Waste company Augean has switched horses and backed a new takeover offer worth £341million.
It had accepted a £315million go-private bid from Morgan Stanley Infrastructure, worth 300p a share.
But it is now backing a buyout offer from a consortium of investment managers Ancala Partners and Fiera Infrastructure, which has bid 325p a share.
Their approach raised the prospect of a bidding war. Augean’s stock rose 17.2 per cent, or 49p, to 334p – a sign higher takeover offers may materialise.
Executive chairman Jim Meredith said: ‘We believe the acquisition is a good outcome for all stakeholders.’
This means Meggitt’s trustees will be keeping a close eye on the leverage – or debt levels, compared to profits – imposed on the company by Parker’s and Transdigm’s bids.
Deals which pile more debt on a company could weaken the pension schemes, since the business will have to spend more on paying interest and could have less for retirement pots. Debt will usually take priority over pension scheme funding if a firm goes bust.
Waite said: ‘Pension fund trustees could be held responsible if they allow a deal with too much leverage to pass, if this ends up harming the pension schemes. It’s not just trustees.
The directors of the target company also need to consider what a deal means for pension fund members.’
Meggitt’s pension scheme has a £201million funding hole, and looks after the retirement savings of 4,600 current and ex-employees.
A takeover by Parker or Transdigm is likely to leave Meggitt – which makes ‘black boxes’ for the RAF Typhoon jets and flight deck display instruments for commercial aircraft – with higher debt levels.
Parker’s leverage is around two times, according to analysts, while Transdigm’s is around seven times.
And both figures will rise as more debt is taken on during the Meggitt takeover.
Transdigm said: ‘Our British businesses employ over 2,000 people, so we fully understand the requirements of acquirers.’
Parker said: ‘We have signed a legally binding memorandum of understanding with the trustee of the Meggitt pension plan alongside our recommended offer.
‘We very much recognise the importance of upholding Meggitt’s pension obligations and are committed to putting the pension plan on a stronger foundation.’
Leeds tech firm bought by Relx in £130m deal
The founder of a Leeds software company is set to make £18million after his firm was taken over by British data giant Relx.
John Lord founded Trunarrative in 2016 and is chief executive of the company that helps banks, casinos, accountancy firms, retailers and logistics groups screen suppliers and customers and check for signs of fraud.
Relx is understood to be paying about £130million, with Lord, 54, in line for £18million as he has about 13.5 per cent of the shares.
American tycoon Larry Smith owns another 83 per cent through his firm Provenir and stands to make around £108million.
And Trunarrative’s top executives, including operating chief Ryan Morrison, commercial boss Mike Harriss and technology chief David Eastaugh, also look in line to share a pot of about £5million.
Relx last year bought Cambridge analytics firm Scibite for £65million, anti-fraud tech firm Emailage Corp for £350million and identification firm ID Analytics for £273million.
Price boost for miner Bacanora
Lithium miner Bacanora has accepted an improved £285m takeover offer after shareholders complained it was being sold ‘on the cheap’.
The offer tabled by China’s Ganfeng is now worth 73.6p per share, compared to a previous bid of 67.5p per share, or £259million.
This comprises 67.5p in cash as well as shares in the Zinnwald lithium project in Germany.
Ganfeng’s earlier offer fuelled a grassroots revolt. Its proposal needs 75 per cent shareholder support.
Lithium is key in making batteries, and currently in high demand.
Rival swoops on fund administrator Sanne
Jersey fund administrator Sanne has agreed to be sold to rival Apex Group for £1.5billion.
Apex will pay 920p per share, higher than the 875p bid from private equity firm Cinven in July.
Sanne provides outsourcing services to nearly 2,000 clients, varying from private debt to capital markets. Apex is a fund services group with 5,000 staff.
Sanne chairman Rupert Robson said: ‘Sanne has delivered substantial value creation to shareholders since IPO and today’s acquisition ensures investors are compensated for the future potential of the business.’
The deal is yet to be voted on by investors.
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