British engineering group Goodwin has said it is considering selling a "substantial part" of its mechanical engineering division, which supplies components to major defence and nuclear programmes, according to the BBC. The Stoke-on-Trent-based company confirmed on Friday that its board had commenced a strategic review to "consider a range of potential options to maximise value for shareholders," with Rothschild & Co advising. Shares in the London-listed group rose by about 10% on Friday morning.
Strategic review and potential sale
The mechanical engineering division earmarked for review comprises Goodwin Steel Castings (GSC), Goodwin International (GI), Noreva, Easat and Pumps, the BBC reported. In a statement, the board said discussions were ongoing and there could be no certainty that a transaction would be entered into.
"The board of Goodwin confirms that it has commenced a strategic review to consider a range of potential options to maximise value for shareholders whilst ensuring continuity for all stakeholders, including customers, and the long-term prosperity of its businesses," the company said. "Discussions are ongoing and there can be no certainty that a transaction will be entered into. Rothschild & Co is advising the board of Goodwin on the strategic review."
Defence programme exposure
Goodwin's mechanical engineering division is a key supplier of components to UK and US frigate and submarine programmes, according to the BBC. That includes Britain's Dreadnought programme, which is building the Royal Navy's next-generation nuclear deterrent submarines, and the Type 26 frigate programme, which is developing a fleet of advanced anti-submarine warships.
| Programme | Description |
|---|---|
| Dreadnought | Next-generation nuclear deterrent submarines; set to replace the UK's Vanguard-class submarines |
| Type 26 frigate | Fleet of advanced anti-submarine warships; the City-class HMS Glasgow is pictured under construction |
According to a Financial Times report cited by the BBC, several potential buyers with records in defence had expressed interest in Goodwin in recent weeks.
Financial and market context
Goodwin Steel Castings and Goodwin International have delivered a boost to the company's profits, benefiting from economies increasing their defence spending, the company's latest annual report said, as reported by the BBC.
Russ Mould, investment director at AJ Bell, said the company is a major supplier to UK and US submarine programmes and has also benefited from "bumper defence spending across other parts of its business."
"The company took a big hit in March when it lost two significant contracts and faced order delays in the Middle East," Mould said. "Yet the interest in Goodwin's defence arm is a reminder that the UK has a collection of engineering businesses which are global leaders in their respective niches. What any sale would mean for the future of Goodwin as a standalone business remains an open question but it is likely to still derive a significant chunk of its revenue from military spending regardless."
Company background and outlook
Goodwin was founded in 1883 and is majority owned and managed by the Goodwin family, with shares listed on the London Stock Exchange. The BBC reported that discussions are ongoing and there can be no certainty a sale will take place, and no timeline for the strategic review was disclosed.
Sources:
