US predator swoops on £1bn Chemring: Another British defence agency focused by international bidders

Britain’s defence industry is facing a fresh overseas takeover threat as a US predator circles a 120-year-old business.

Bain Capital is reported to have tabled a 390p-a-share offer valuing Hampshire-based Chemring at more than £1billion in recent weeks.

The move will raise fresh fears that Britain’s defence sector could be further hollowed out as lacklustre stock market valuations leave firms vulnerable to foreign buyers.

That is despite the boost that has been provided to the industry over the past three years since Vladimir Putin’s tanks rolled into Ukraine – waking up many governments to the need to rearm as global threats rise.

One analyst described Chemring’s valuation as ‘absurdly cheap’. The likes of Meggitt, Cobham, Ultra Electronics and Laird have all fallen victim to takeovers in recent years.

Meanwhile, ship builder Harland & Wolff – with a contract to deliver vessels for the Royal Navy – was bought out of administration by Spain’s Navantia.

Target acquired: Chemring, which was founded in 1905, supplies governments and companies across the globe, with customers including the Royal Air Force

Chemring shares rose by as much as 16 per cent after Sky News revealed Bain had made an approach. The stock later gave up some of the gains to close up by just 4.3 per cent, or 15.5p, to 373.5p.

The report said a second offer was being prepared by Bain but added there was uncertainty about how aggressively the private equity firm was prepared to be in pursuing the company.

Chemring and Bain both declined to comment. If any approach does convince the board to sell, the deal would be likely to face government scrutiny on national security grounds.

That could provide a tough test for Labour at a time when it is seeking to beef up Britain’s military credentials.

Ministers will also want to avoid friction with corporate America at a time when Donald Trump is lashing out at those perceived to stand in its way.

Founded in 1905 as the British, Foreign and Colonial Automatic Light Controlling Company, Chemring started out as the maker of equipment used to change street lighting from gas to electricity, before broadening out to become a defence engineering specialist. 

Today it supplies governments and firms across the globe, with customers including the Royal Air Force.

Chemring describes itself as the global leader in countermeasures – devices that repel enemy attacks – supplying 85 per cent of Nato air fleets and 60 per cent of the alliance’s naval fleets.

Shares have risen by more than a third over the past three years but hugely underperformed other defence sector players including BAE, whose value has more than doubled, and Rolls-Royce, whose share price has climbed sixfold.

Dan Coatsworth, investment analyst at investment platform AJ Bell, said: ‘Chemring is one of the UK’s shining lights – it was always a question of when and not if a takeover approach would emerge. 

The big test will be whether the Government allows a sale of a UK defence firm to a US investment group, particularly if there are concerns from national security perspective.’