Dorset-based Meggitt will use a 69.8m share placement, equivalent to about 10 per cent of total share capital, to raise about £255m to fund the deal. The remaining £176m will be funded using debt, it said, adding that the acquisition is expected to be earnings enhancing immediately.
Meggitt chief executive Terry Twigger said the acquisition was a “further major step” in the group’s strategic growth, and would fill specific gaps in Meggitt’s product lines.
PSA’s fire suppression products will fit with Meggitt’s fire detection systems to enable them to sell combined units that customers have been asking for, he said. It will widen the number of aircraft models Meggitt can supply, and brings expertise in new electric aircraft systems to replace the older hydraulic systems that Meggitt already supplies.
The share placement is the second Meggitt has used to fund an acquisition after it bought US firm K&F Industries in 2007 for $1.8bn.
Meggitt has consistently said it does not want to take on a debt ratio of greater than 3.5 times overall earnings. At its last interim results debt was 2.3 times earnings. It estimates it will have a 2.5 times debt to earnings ratio by 30 June this year, which will fall to two times by 31 December.
ROTHSCHILD’S head of investment banking, Robert Leitão, is an expert in M&A deals, particularly those involving public companies.
Since joining the bank in 1998 from Morgan Grenfell, where he spent nine years, he has built Rothschild’s M&A arm to be the City’s top M&A bank by number of transactions, specialising in deals in the mid-market range.
Among his most prestigious recent deals is the huge $9.6bn (£6bn) sale of a majority stake in Cairn Energy’s Indian arm to Vedanta Resources, which required agreement from the Indian government to secure.
Other deals include Babcock’s £1.32bn acquisition of VT group in March; investment fund Melrose’s $855.6m disposal of McKechnie Aerospace in 2007, and Thales’ £51m takeover of data security firm nCipher in 2008, among others.
A chartered accountant, Leitão qualified at Peat Marwick Mitchell (now KPMG) and holds an engineering degree from Imperial College London. He is working with Ravi Gupta at Rothschild to advise Meggitt.