Senior rejects Lone Star’s £840m takeover offer

Senior, the aerospace and defence group, has rejected a final takeover offer from US private equity firm Lone Star Global Acquisitions, describing it as “highly opportunistic”.

Lone Star’s investment vehicle, LSF XI Investments, on Monday raised its proposed offer for the UK group to £840m.

It said it had offered a fifth and final proposal at 200p a share after Senior rejected a previously undisclosed fourth offer at 185p last week.

Lone Star first went public with its pursuit of Senior at the end of last month after offering a third proposal at 176p a share on May 20. It had until this Friday to make a firm offer or walk away under London Stock Exchange rules. 

Ian King, chair of Senior, said the final proposal was “highly opportunistic given the timing and the relative share price weakness, coming at a point where our end-markets are showing signs of recovery”. 

The board, he added, “believes we have a clear strategy that will maximise value for shareholders over the medium-term”.

Nevertheless, the company said it was willing to engage with Lone Star or other potential suitors at a price that reflected Senior’s “fundamental value”.

Shares in Senior, which had already dropped when markets opened on Tuesday morning, closed at 146p, down 12 per cent. 

Along with other aerospace and defence companies, Senior has been hit hard by the slowdown in civil aviation during the pandemic. With airlines reducing capacity to shore up their balance sheets in the face of the crisis, aircraft and engine makers cut their production rates. This had a knock-on effect throughout the supply chain, including on Senior, whose aerospace sales declined 25 per cent in the first quarter of 2021.

Shares in the company have suffered over the past 12 months, falling from 184p in January 2020 to a low of 42p in September last year. They had begun to recover in recent months but jumped when news of Lone Star’s interest emerged in May. 

Even before Covid-19 hit, Senior’s aerospace sales had been suffering from its exposure to Boeing’s 737 Max, whose production was halted following two deadly accidents. The company was already in the process of restructuring its businesses by disposing of non-core assets and reducing headcount.

Senior said on Tuesday that its restructuring programme was starting to deliver. It expected the cumulative savings of £36m that had been realised to the end of 2020 to increase to £45m by the end of this year. These would rise to £50m from 2022. 

It also said its aerospace division was well-positioned to benefit from the anticipated recovery in aviation markets as international travel restarted. Both Airbus and Boeing have recently confirmed plans to increase production of their single-aisle aircraft used predominantly on short-haul flights, which are expected to recover first.