US private equity firm Veritas has agreed to buy Macclesfield-based Bodycote, the world's largest provider of heat treatment and specialist metallurgical technologies, for £1.65bn or 940p a share, or £1.85bn including debt. The deal marks another foreign swoop on a FTSE 250 industrial firm, continuing a trend that has drawn little political attention.
The company, which has 130 sites across 22 countries and 4,000 employees, provides processes and coatings used to toughen jet engine blades. Its shares closed at 955p, suggesting the market believes rival bidder CVC, a European private equity firm, may return with a higher offer.
Valuation Concerns
Investment bank RBC's analyst noted the valuation "does not appear particularly generous on a take-out basis," pointing out it is only 25% above the pre-bid level and the implied earnings valuation is merely in line with Bodycote's 10-year average.
Bodycote's announcement highlighted the success of its medium-term "optimise, perform, grow" strategy adopted in late 2024, which aims to find efficiencies and shift towards the expanding aerospace and defence sectors. The plan targets 20%-plus operating margins and a return on capital employed of 15 to 20% through the cycle.
Board's Conflicting Signals
The company has spent £120m on share buy-backs while maintaining a 38-year record of growing or maintaining the dividend. Directors said they are "confident in the ongoing execution" of the strategy, with "the majority of remaining improvements under Bodycote's control."
However, the last sentence of the announcement mentioned "increasing structural challenges in certain automotive and industrial markets together with macroeconomic uncertainties which create meaningful risk to delivery of Bodycote's medium term financial targets."
Market Pressures and Political Silence
Bodycote's 54 years of London stock market life will end one way or another, joining a long list of departees this year, including telecoms company Gamma Communications for £1.1bn and Scottish energy firm Capricorn for £292m on Tuesday alone.
The company had received a wake-up call in the spring when Apollo, another US private equity outfit, expressed interest in bidding at 885p before walking away. A recent Peel Hunt report calculated 150-plus bids for UK companies with a market value of more than £100m since the start of 2023.
Despite the rate of exodus, there was barely a squeak out of Westminster, raising questions about whether "selling the family silver" may not be in the UK's long-term economic interests.
