The UK government should own a ‘golden share’ in all defence groups critical to UK national security to stop them being taken over by overseas rivals, an influential group of MPs has said.
The Defence Select Committee made the call after FTSE 250-listed contractor Meggitt PLC (LSE:MGGT) (LSE:MGGT) agreed a £6.3bn takeover by US rival Parker-Hannifin Corp (NYSE:PH) and with US private equity-owned Cobham recently agreeing an increased deal to buy Ultra Electronics (LSE:ULE) PLC (LSE:ULE).
Currently, the government has golden shares in BAE Systems PLC (LSE:BA.) (LSE:BA.) and Rolls-Royce Holdings PLC (LSE:RR.) (LSE:RR.), plus some of Babcock International (LSE:BAB) (LSE:BAB)’s dockyard assets.
This should be expanded, said committee chairman Tobias Ellwood: “If we are going to utilise the golden share mechanism, there is a strong argument it should be expanded to other important companies that make critical contributions to UK security.”.
He pointed out that Meggitt works in advanced composites, avionics and sensors, which could easily be argued gives it “every qualification to be treated the same as golden share companies BAE Systems and Rolls”.
Business secretary Kwasi Kwarteng is said to be “closely and actively monitoring” both the Meggitt and Ultra deals, with the Telegraph newspaper reporting that he is advocating that Parker provides stronger guarantees over its plans for Meggitt in the UK.
Paul Killik, whose Killik & Co firm’s clients hold £2.5mln in Meggitt shares, said: “Our defence sector is being hollowed out – these are irreplaceable businesses, among the crown jewels of British technological knowhow.
“The fund managers who collectively own Meggitt won’t stop its takeover, not if they are being offered such a premium. Bidders can afford to offer irresistible premiums because London-listed stocks are so cheap at the moment.”