Chemring surges as Bain Capital said to have made takeover proposal

(Sharecast News) - Chemring surged to the top of the FTSE 250 on Monday following a Sky News report that private equity firm Bain Capital has made an approach to buy the defence group. One source suggested to Sky that an initial offer may have been tabled at 390p a share. This is a modest premium to the 356p at which the stock was trading on Monday morning.

They also said that a second offer had been under preparation by Bain, although it was unclear whether it had been submitted to the company's board.

Another insider told Sky there was uncertainty about how aggressively Bain was prepared to pursue the company.

Chemring employs roughly 2,700 people, according to its most recent results announcement published in mid-December.

Shares in Chemring slumped on 17 December, despite the firm reporting a record order book amid global political tensions and the war in Ukraine.

The company said at the time that revenues rose 8% to £510m in the year to 31 October. Underlying core earnings were up 6% to £93.7m and the order book surged 13% to £12.03bn.

However, it also reported operational challenges at its Tennessee countermeasures business due to production being disrupted by adverse weather conditions and delays in the ramp up of its automated facility.

"The underlying operating profit margin was also adversely affected by deliveries made on a legacy contract from 2016 for the supply of countermeasures to the US Department of Defence. Having previously been expected to complete in the second half of the financial year, the customer has now exercised an option to extend the duration of this contract, which will now conclude in the first half of FY25," Chemring said.

At 1215 GMT, the shares were up 13.5% at 406.20p.