Rotork PLC's (LSE:ROR) agreement to a £4.1 billion takeover by Switzerland's ABB sparked a rally across the FTSE industrial engineering sector, adding to evidence that overseas buyers continue to target UK manufacturers.
Shares in the FTSE 250-listed flow control specialist surged 67% to 486p after ABB agreed to pay 503p a share in cash, with shareholders also eligible to receive an interim dividend of up to 3p.
The recommended offer represents a 73% premium to Wednesday's closing price for the Bath-based company.
The bid lifted sentiment across the sector. Diploma PLC (LSE:DPLM) rose over 5%, while RS Group PLC (LSE:RS1) gained 2.2%. Weir Group PLC (LSE:WEIR) and discoverIE Group PLC (LSE:DSCV) climbed 4%, with IMI PLC (LSE:IMI), Spirax Group PLC (LSE:SPX) and Smiths Group (LSE:SMIN) also among the strongest FTSE 350 performers.
Another London-listed industrial business also received a takeover offer on Thursday: AIM-listed Gooch & Housego, which makes precision optics for aerospace, defence and life sciences customers, recommended a cash offer from US private equity firm Arlington Capital Partners worth 1,230p a share. Including its interim dividend, shareholders will receive 1,234.9p a share, a 41% premium to Wednesday's closing price.
The deals add to a string of recent takeovers of UK industrial names, including Spectris, Dowlais, Renold, DS Smith, TI Fluid Systems.
City figures have warned that Britain is "selling the family silver", noting there had been 154 takeover bids for UK companies worth more than £100 million since the start of 2023, with a combined value of £165 billion, compared with just 11 IPOs worth £6 billion over the same period.
On Rotork, analyst Alex O’Hanlon at Panmure Liberum said the likelihood of a competing offer is "relatively limited, with the shares now likely to trade primarily on the probability and timing of completion".
Peel Hunt analyst Harry Philips said ABB's offer reinforced the appeal of UK-listed industrial companies to overseas acquirers.
"We view the UK quoted industrials sector as 'Jacks in the land of Giants' - they are global niche companies with high market shares and high barriers to entry in process- and safety-critical applications," Philips said.
"They have come through the many headwinds since 2019 stronger and leaner, without this being recognised in valuation, hence the flurry of activity in the last two years."
Philips added: "Going into recovery, UK Industrial assets are attractive, given this global nature coupled with the discounted valuation multiples they trade on - we believe this substantial offer for Rotork proves our point."
O'Hanlon said he believes that "Halma and Weir offer a good entry point for investors looking to redeploy their cash into other high-quality industrial compounders".
Dan Coatsworth, analyust at AJ Bell, said overseas "predators are... further diminishing the breadth, depth and quality of the London market".
Rotork, he said, was one of the UK's many industrial businesses that "global leaders, albeit in niche areas", with the takeover from ABB further thinning these ranks on the LSE.
Today's potential departures "would be less of an issue if there was a healthy pipeline of new names listing in the UK", Coatsworth said.
** UPDATE: Adds more details and broker quotes **
