Fears over Brexit kill City’s £3.5 bn Spectris takeover

Market jitters lead to a plunge in deals

A £3.5 BILLION takeover of a London-listed firm has collapsed after two private equity buyers pulled out due to the market turmoil caused by Brexit, City sources say.

Bain Capital, set up by former US Presidential candidate Mitt Romney in 1984, and Advent International are understood to have held talks last month about a joint bid for FTSE 250-listed Spectris in what would have been one of the largest debt-fuelled takeovers of a publiclylisted British company this year.

Investment banks Citigroup, Morgan Stanley and HSBC had been lined up by Advent and Bain to advise and finance the takeover of Spectris, a specialist testing equipment and engineering company that was originally set up in 1915 by Sir Richard Fairey to make seaplanes.

However, the buy- out barons backed out of the deal earlier this month, with one source claiming the uncertainty caused by the political chaos surrounding Brexit was a reason that Bain decided against pursuing the transaction.

The deal is the latest to fall victim to stock market turmoil this winter and the uncertainty around Britain’s exit from the UK, which is wreaking havoc in the City. New data show just 895 deals involving British companies were announced in the final quarter of 2018 – the lowest since 2013. The figure is down 25 per cent on the 1,188 deals in the same period in 2017, according to data provider Refinitiv.

Other deals impacted by the uncertainty around Brexit include the doomed takeover of shopping centre giant Intu, which owns Lakeside and the Trafford Centre.

Property tycoon John Whittaker, Canadian firm Brookfield and Saudi Arabian investor Olayan spent three months in extensive negotiations, only to decide against l aunching the £ 2.8 billion deal because of ‘the uncertainty around current macroeconomic conditions and the potential near-term volatility across markets’.

Meanwhile on Friday, RPC said it had asked the takeover panel to give Apollo – an American private equity giant founded by Wall Street financier Leon Black – an extra three weeks to come up with the cash for its potential £2.7 billion plus bid for the plastics company amid rumours the firm is struggling to raise the debt for its formal offer. Other deals put on ice include the £2 billion sale or float of The Range, the privatelyowned retailer controlled by entrepreneur Chris Dawson.

Although the Brexit crisis is clogging up the City’s deal-making pipeline, bankers said the other major issue is the recent equity market sell-off.

US share indices, such as the S&P 500, have tumbled around 15 per cent si nce October while t he FTSE 100 is enduring its worst December since 2002 and is on course to finish the year down 14 per cent, its biggest annual drop since 2008.

Jacques Callaghan, a senior managing director at Macquarie Capital, said: ‘The main reason why so many deals have been called off or put on hold recently is because the stock market sell-off has caused a misalignment between what bidders are willing to pay and what owners, companies or boards are willing to accept.

‘In the UK, the turmoil and uncertainty surrounding Brexit has accentuated this misalignment around pricing.’

Advent International and Bain Capital declined to comment.