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On 28 February 2022, Oxford Instruments plc confirmed that it had received an approach from rival, Spectris plc, regarding a possible takeover offer.

The possible cash and shares proposal follows a series of earlier proposals from Spectris throughout February 2022, valuing each Oxford Instruments share at £31. Should the acquisition proceed, Oxford Instruments shareholders would receive £19.50 in cash as well as £11.50 in new ordinary Spectris shares for each Oxford Instruments share, to be issued on the basis of an exchange ratio that will be determined if the current possible offer becomes firm.

While discussions between Oxford Instruments and Spectris remain ongoing, Oxford Instruments appears to be pleased with the terms of the possible takeover proposal made by its rival. In the made on 28 February 2022, the company stated:

‘Having considered the terms of the Proposal together with its advisers, the Board of Oxford Instruments has indicated to Spectris that the Proposal is at a price level that it would be minded to recommend to Oxford Instruments shareholders, subject to the agreement of customary terms and conditions’.

On the current terms, the offer would value the high-tech instruments manufacturer at approximately £1.8bn. Spectris, a supplier of precision instruments, test equipment and software, has the confirmation by Oxford Instruments that the proposal is at a price level that it would be minded to recommend to shareholders as it believes the offer represents a compelling strategic combination, bringing together the complementary strengths of both companies and unlock significant synergies.

Andrew Heath, CEO of Spectris, :

‘A combination of Spectris and Oxford Instruments would bring together two highly complementary businesses and create a leading global player in precision measurement. Oxford Instruments' highly attractive, differentiated technologies are leaders in their fields and, combined with our own, will deliver a significantly enhanced value proposition for customers. The Spectris Board believes that a combination of our businesses will deliver a stronger future for both companies as a UK champion in the high technology instrumentation sector, and create immediate and long-term value for shareholders.’

Oxford Instruments was founded by Physicist, Martin Wood, and was spun out of Oxford University in 1959. It is now the parent company to nine organisations, including Asylum Research, Imaris, Magnetic Resonance and Plasma Technology.

News of the potential deal caused Oxford Instruments’ shares to surge 30% on 28 February 2022, trading at £26.65 per share, after the company announced its plan to accept the favourable terms. Investors have jumped on the opportunity believing that the potential deal is set to create a new FTSE 100 high-tech manufacturing powerhouse with a combined market capitalisation of over £4.5bn.

The potential offer for Oxford Instruments follows a number of rival approaches for UK companies in the first quarter of 2022. On 28 February 2022, e-commerce specialist, Clipper Logistics a £965m offer from US rival GXO Logistics, a deal that would strengthen GXO’s position at the centre of UK supply chains and online retail in the logistics sector, and after much back and forth between John Menzies plc and Kuwait-based rival National Aviation Services over a series of ‘opportunistic’ proposals (see: John Menzies continuously rejects Kuwait rival’s ‘opportunistic’ takeover bid), the companies reached on the terms of a possible offer on 21 February 2022. However, the deal between Oxford Instruments and Spectris provides a rare opportunity for two UK rivals to create a ‘UK champion’ in a climate of increased foreign private equity activity in UK public markets.

According to data compiled by Market Tracker, in 2021 a staggering 64% of the takeover transactions announced were made by companies backed by private equity.

Commenting on this trend in our Trends in UK Public M&A trend report, Simon Wood Partner, Addleshaw Goddard notes:

‘Private equity has been the story of the year. The key driver for this was the competition for a limited number of quality private sale mandates, leading PE firms to look for better value in UK plc. The volume of private equity’s dry powder means this will be a systemic issue of the public M&A landscape for the foreseeable future.’

However so far in 2022, 33% of the takeover transactions announced have been between London-listed companies, signalling that more British public companies could be looking to create UK synergies.

The put up or shut up deadline, by which Spectris is required to announce whether or not it has a firm intention to make an offer, is on 28 March 2022. Market Tracker will continue to monitor this transaction as it develops.