Cerberus nears Goodwin defence unit acquisition in potential £1bn deal

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Cerberus nears Goodwin defence acquisition

Highlights

Cerberus is nearing acquisition of Goodwin's defence business, valued at about £1bn, with a deal possibly finalized within days.
Goodwin, which reported record £77.5mn profit on £280mn revenue to April, could face UK and U.S. regulatory scrutiny due to sensitive military contracts.
After the defence unit sale, Goodwin will focus on refractory and technological divisions, which generated about £10mn operating profit last year.

Deal talks and strategic review

As first reported by the Financial Times, Cerberus is closing in on an acquisition of Goodwin’s defence business and could reach an agreement within days, according to people familiar with the matter. The people said the unit is valued at about £1bn, while cautioning that discussions could still change and no sale has been finalised.

Goodwin, a Stoke-on-Trent-based engineering group listed in London, has attracted interest from several buyout firms earlier this summer. In August, chair Timothy J W Goodwin said the mechanical engineering division’s stronger performance had substantially increased its strategic value and drawn considerable outside interest.

The possible disposal follows Goodwin’s review of a substantial part of its mechanical engineering division, which includes assets such as Goodwin Steel Castings, Goodwin International, Noreva, Easat and Pumps. The company has said that after a sale it would consist of its refractory and technological divisions, which generated about £10mn of operating profit in the year ending April.

Defence exposure and regulatory scrutiny

Goodwin supplies components for the UK’s Dreadnought submarines and also serves U.S. naval programmes including Virginia-class and Columbia-class submarines, guided-missile destroyers and the Gerald R Ford-class aircraft carrier. Because of the sensitivity of these military assets, any transaction and buyer could face scrutiny from British and U.S. authorities over national security risks.

Goodwin, which is 143 years old and half-owned by its founding family, generated record profit of £77.5mn on revenue of £280mn in the year to April, marking a 118% increase from a year earlier. Its shares have fallen about 9% since the start of the year, leaving the group with a market capitalisation of about £1.5bn.

Cerberus, founded in 1992 and based in New York, manages about $70bn across credit, private equity and real estate strategies. The firm has invested in distressed property, banks and aerospace and defence assets, while both Cerberus and Goodwin decline to comment on the talks.

The CMA’s procurement data drive is focused on gaining wider access to government tender records, including potential cooperation with the Ministry of Defence, to spot suspicious bidding patterns and possible collusion in supply chains. Our publication previously noted that the regulator wants to use a screening tool on procurement data to generate enforcement leads, alongside tougher rules that can bar competition-law offenders from public contracts.

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