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U.S. charges fraud over bogus $13.8 billion Textron takeover bid

Stock Markets Apr 05, 2022 02:56PM ET
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© Reuters. FILE PHOTO: The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly/File Photo

By Jonathan Stempel

NEW YORK (Reuters) -U.S. authorities on Tuesday announced criminal and civil charges against the former head of a now-defunct British company for making a fraudulent bid to buy U.S. aerospace and defense company Textron Inc (NYSE:TXT) for about $13.8 billion.

The Department of Justice and the Securities and Exchange Commission (SEC) said Melville ten Cate and his London-based Xcalibur Aerospace Ltd were never in a position to complete a tender offer for Textron, including because they lacked financing.

Prosecutors said ten Cate, 53, a dual U.S.-Dutch citizen now living in Dubai, is at large. He could not immediately be reached for comment.

The defendant was accused of making overtures to Textron over nearly two years before placing a Nov. 9, 2020 advertisement in the New York Times - which he never paid for -offering to buy Textron shares at $60.50 each, a 56% premium.

According to the SEC, ten Cate falsely claimed on Xcalibur's website to have lined up $11 billion in financing, and in an interview with the regulator's staff lied about the financing and his company's ability to complete the tender offer.

Xcalibur claimed to have produce high-speed unmanned aircraft systems.

Shares of Textron rose as much 15.9% after the tender offer, which the Providence, Rhode Island-based maker of Beechcraft and Cessna business jets dismissed as "fictitious." Textron reported having 228.9 million shares at the time.

The Justice Department separately accused ten Cate of trying to defraud banks and investors out of $500 million by inflating Xcalibur's financials and prospects, and saying the company had nearly 9.8 billion British pounds ($12.8 billion) in cash.

"Fraudsters talk big and hope no one looks too closely at the bottom line," U.S. Attorney Damian Williams in Manhattan said in a statement.

The Justice Department charged ten Cate with tender offer fraud, securities fraud and two counts of wire fraud. Each count carries a maximum 20-year prison term.

The SEC filed related civil charges and is seeking a fine. Both cases were filed in Manhattan federal court.

A British court put Xcalibur into liquidation last July, the U.S. authorities said.

U.S. charges fraud over bogus $13.8 billion Textron takeover bid

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