Chemring shares rocket after approach

The company, which has a market value of £605.8m, declined to comment on the status of the approach and whether it was considering it.

Carlyle has until September 14 to either make a firm bid for Chemring or pull out, as per the takeover code.

Chemring and its peers are facing the challenge of coping with lower defence spending in the United States and Europe as governments tighten their belts in an effort to rein in budget deficits.

The threat of a second round of cuts to US defence spending under a process known as sequestration has further weighed on investor sentiment, prompting speculation that the company is an attractive buyout candidate.

However, the company – which makes flares, equipment to detect improvised explosive devices and the mechanisms used in ejection seats – said in June that it was on track to meet its full-year expectations and its order book was up 14 per cent at £1bn since October 2011.

Chemring is expanding into the Middle East, Far East and South America, and selling off non-core assets. About 30 per cent of Chemring’s revenue came from non-NATO customers in the six months to April 30, compared with 24 per cent a year ago.

Earlier this month, the company said it would sell its marine interests business – which supplies distress signals to the commercial and leisure markets – with part of the proceeds to go towards buying back shares and cutting debt.

Chemring shares have fallen 21 per cent so far this year leading to speculation last month that larger American rival General Dynamics may have been readying a bid.

Company chairman Peter Hickson is also chairman of Leeds printing firm Communisis.

Shares closed last night at 414.70p, a rise of 101.30p.