Major British defence companies heading for foreign acquisition

Cobham Group, which is based in Dorset but owned by US private equity firm Advent, has confirmed it has agreed a £2.57bn deal to acquire Ultra Electronics. Ultra Electronics, a 100-year-old company headquartered in London and with branches around the world, designs a range of defence technologies, including precision control and military-grade noise reduction systems.

Cobham executives leading the bid for Ultra Electronics stated that it “recognises the specific importance of Ultra’s contribution to the economy and national security [of the UK]” and they are prepared to agree to binding commitments to the UK government, which has been assessing the acquisition. Business secretary Kwasi Kwarteng is reported to have ordered a national security investigation under the Enterprise Act.

Cobham said it would protect existing UK jobs and invest in R&D to stimulate further job creation in manufacturing and engineering.

The group said it will “engage proactively and collaboratively with HM Government to agree the detailed terms, duration, nature and form of these commitments, which would apply immediately from completion of the acquisition to protect the Ultra businesses and stakeholders following closing.” The commitments also relate to issues such as safeguarding national security and continuity of supply and critical capabilities in the UK.

It also said it would keep the company headquartered in the UK and that the government would have an “ongoing dialogue, cooperation and monitoring” role to ensure its commitments are upheld.

Cobham, which is best known for technology permitting mid-flight refuelling, said the deal will complement the businesses through design, engineering and manufacturing. It must still secure the support of 75 per cent of shareholders to follow through with the deal.

Shonnel Malani, chair of the Cobham Group, said: “We believe Cobham and Ultra’s complementary capabilities delivering mission critical technology will be significantly enhanced through the combination of the two groups, enabling the development of higher performance solutions for our customers. We look forward to working with HM Government, and other relevant stakeholders, to agree legally binding commitments which safeguard Ultra’s contribution to the UK economy and national security.”

Tony Rice, chair of Ultra, said: “The Ultra board has spent considerable time reviewing the potential impact of Cobham’s ownership on Ultra’s stakeholders and is comfortable that their stakeholder commitments plus legally binding undertakings to HM Government will protect stakeholder interests appropriately. The Ultra board therefore unanimously intends to recommend the Cobham offer to shareholders.”

Meanwhile, rival defence company Meggitt, which is also active in civil aerospace and energy sectors, has reaffirmed its plans to accept a £6.3bn takeover bid from US-based Parker Hannifin. It said the stock market’s Takeover Panel will be setting a deadline for TransDigm to make its rival bid of £7bn binding, which would delay the sale to Parker Hannifin.

In recent months, the government has come under criticism for alleged passivity regarding the sale of strategically important British companies to foreign owners, such as the UK’s largest semiconductor manufacturing facility to Chinese-owned Nexperia.