Goodwin, a British engineering company based in Stoke-on-Trent, is exploring the sale of a "substantial part" of its mechanical engineering division. This division includes key businesses like Goodwin Steel Castings (GSC), Goodwin International (GI), Noreva, Easat, and Pumps. Rothschild & Co is advising the board on this strategic review, which aims to maximize shareholder value while ensuring continuity for stakeholders.
The mechanical engineering division is a critical supplier for major defense and nuclear programs in both the UK and US. This includes components for Britain's Dreadnought submarine and Type 26 frigate programs, as well as US submarine programs. Goodwin Steel Castings and Goodwin International have seen increased profits due to rising defense spending. The company's defense operations alone account for approximately 57% of its forward order book.
Several potential buyers with experience in the defense sector have expressed interest. The company's shares rose by about 10% following the announcement. Analysts like Russ Mould of AJ Bell note that Goodwin's defense arm is a testament to the UK's global leadership in niche engineering businesses, despite the company facing challenges earlier in the year with lost contracts and order delays in the Middle East. The sale's implications for Goodwin as a standalone business are uncertain, though it is expected to continue generating significant revenue from military spending.
The potential sale could be subject to scrutiny under the UK's National Security and Investment Act, particularly given the involvement in defense, military, and dual-use technologies. The complexity of separating defense and civil work, which often share foundry and machining capabilities, will influence the structure and valuation of any deal. While there's strong buyer interest due to increased defense output and scarce manufacturing capacity, price won't be the sole consideration; preserving delivery, protecting sensitive knowledge, and satisfying governments will also be crucial.
