Cheap brake

5 July 2004 By Robert Cyran Follow @rob_cyran

To finance the acquisition of a business larger than itself, Meggitt had to be creative. The defence firm has agreed to sell off half of the business to private equity, and to hold a £181m rights issue.

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Meggitt has agreed to buy Dunlop Standard for £787m from the private equity firm Doughty Hanson. Dunlop is composed of two businesses: an aviation design and manufacturing unit, and an engine repair unit. Meggitt will immediately sell the engine repair business to private equity firm Carlyle for £376m.

To finance the acquisition, Meggitt plans to issue £141m in debt and hold a 3 for 7 rights issue at 145p per share. The shares were trading at 261p per share prior to the announcement. The rights issue is underwritten by Merrill Lynch and Rothschild, who advised Meggitt on the deal.

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