Sheffield Forgemasters to be acquired by the Ministry of Defence for £2.56m

Sheffield Forgemasters is set to be acquired by the Ministry of Defence (MoD) as it looks to shore up the engineer's defence-critical plant.

Shareholders agreed to sell their entire share capital to the MoD.

Shareholders agreed to sell their entire share capital to the MoD, a move which will support a substantial recapitalisation of its defence-critical plant, equipment and infrastructure necessary to secure the delivery of components into future MoD programmes.

The intervention will secure Sheffield Forgemasters’ role as a key supplier into the MoD for the long-term and is structured to invest substantial new capital into the modernisation of defence-critical assets, including plans for a replacement heavy forge line and building, a flood alleviation scheme and major machine tool replacements.

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David Bond, CEO at Sheffield Forgemasters, said: “The agreement to bring the company under the ownership of the MoD provides a more secure future for the business and its people.

“The MoD’s intention is to invest up to £400m over the next 10 years to replace defence-critical equipment and infrastructure as we recapitalise our productive capacity, positioning the company to retain and create new highly skilled manufacturing jobs within the Sheffield City region.

“Sheffield Forgemasters and its shareholders are not able to fund an investment of this size and so this acquisition marks the culmination of a process, started two years ago, that enables us to be a reliable and secure supplier to defence for the long-term.

“I am grateful to my colleagues on the board and throughout the business who have supported us on this journey.”

The intervention heralds a new chapter in the long history of Sheffield Forgemasters.

Steve Hammell, chief financial officer at Sheffield Forgemasters, said: “The board of directors at Sheffield Forgemasters is unanimous in its support for the terms of the acquisition and is strongly of the view that the deal is in the long-term interests of all stakeholders of the business, including shareholders, employees, customers, suppliers, the local community and the Sheffield City region.

“We have secured the support of our major shareholders, who have agreed to sell their shares to the MoD at a price of 121 pence per share, equating to total consideration of £2.56m.

“The transaction also involves a refinancing of the company’s credit facilities with the financial guarantees provided by Rolls-Royce, BAE Systems and Babcock falling away.

“We will now enter an approved offer period with completion of the deal to follow in three weeks time.”

He added: “We recently announced the purchase of a second hand 13,000 tonne forging press from Japan and will move forward with the recapitalisation programme to renew defence-critical infrastructure.”

Sheffield Forgemasters will operate under the leadership of its current executive directors and senior management, supplemented by the appointment of two further non-executive directors including one from the UK Government.

Mr Bond said: “Although the MoD’s priority is to secure defence outputs, we will continue to operate in commercial markets with our existing equipment and will also look to exploit opportunities that may arise from the UK Government’s net zero carbon agenda, including Off-shore Wind projects and the Civil Nuclear market.

“Sheffield Forgemasters has now established a base for a sustainable future. These are exciting times for the company as we enter a new chapter in its 200 year history alongside the Ministry of Defence.”

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