Sky News reported that one of the largest private equity firms in the world, Bain Capital has approached Chemring, a defence and aerospace company listed on the FTSE250.
This move fits into a trend where foreign investors are increasingly interested in buying out undervalued UK firms.
Chemring Group’s share price rose by over 14% Monday.
The report stated that according to sources who are familiar with this matter, Bain made at least one offer in the last few weeks. An initial proposal was reportedly presented at 390p a share.
The stock price for Chemring was 356p on Monday morning.
It was reported that a second offer is being considered, but it’s unclear if it’s been submitted formally to the board of directors, which is chaired former Rolls-Royce Holdings executive Tony Wood.
Chemring is a sensitive strategic deal, but Bain’s next move is uncertain
Bain Capital may be interested, but it is not certain that they will pursue this deal aggressively.
According to one source, the firm has not decided yet how far they are willing and able to take negotiations.
Chemring is a high-tech manufacturer of defence equipment, and provides services to organisations such as NASA and SpaceX. It remains a strategic acquisition target.
The company’s products include infrared-based countermeasures that are designed to repel enemy attacks.
Around 2,700 employees work in the company, which has operations that cover critical sectors of defence and aerospace.
Chemring’s most recent financial report, which was published mid-December this year, revealed that it had a record number of orders.
Its shares fell, however, following fears over profits margins related to problems at an American facility.
Interest in defence spending is on the rise
Private investors are now interested in companies such as Chemring because of the surge in international defence spending.
NATO has pledged an increase in military spending, primarily as a response to the geopolitical tensions that have arisen since Donald Trump was reelected US President.
Michael Ord has stated his confidence in Chemring’s future. He called its prospects “increasingly solid.”
Analysts in the defence industry also echoed his sentiment that we are now living in an age of great power competition, as opposed to globalisation.
Chemring stock is largely unchanged compared with a year earlier, despite its record-breaking order book.
A typical 30% takeover premium would put the value of the company around PS1.3billion.
Private equity firms are increasingly taking over UK companies .
Chemring was the most recent in a long line of London listed firms that were targeted by private equity companies.
General Atlantic recently announced that it would be taking Learning Technologies Group private, while BP & ITV are still the subject of speculation.
Prosus, a tech investor, made a EUR 4.1 billion offer to buy out Amsterdam-listed Just Eat Takeaway. The company recently delisted its London listing.
Bain Capital has been reticent about the approach it takes. Its portfolio, which includes Virgin Voyages and esure, is a tight-lipped one. Chemring also refused to make any comments on this matter.
The post Chemring share price surges 14% after Bain Capital deal buzz could be updated as new information unfolds
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