Ultra Electronics agrees £ 2.6bn buyout by rival defense firm Cobham

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The government is increasingly criticized for taking a ‘weak’ stance on overseas takeovers of UK firms, amid the sale of two London-listed defense contractors to state-backed buyers United valued at nearly £ 9 billion.

Labor and former city minister Paul Myners said serious questions were raised by the sale of Ultra Electronics, a defense company that supported coalition forces in Afghanistan, and Meggitt, a supplier wheel and brake system based in Coventry for fighter jets used by Royal Aviation.

Ultra’s board said on Monday it had agreed to a £ 2.6bn takeover with US rival Cobham Group at £ 35 a share, more than 40% higher as the company’s record stock price.

Dorset-based Cobham, owned by US private equity firm Advent since a £ 4 billion deal in 2020, said the combined company will play a ‘mission critical’ role in defense and security of the “five-eye” network of intelligence allies – the UK, US, Australia, Canada and New Zealand.

He offered binding commitments to the UK government in a bid to secure its blessing for the deal, including protecting sovereign defense capabilities, funding the company pension scheme and investing in the UK .

But Cobham also acknowledged that he could sell Ultra’s forensic and energy businesses, while a “limited number” of jobs, mostly related to the company’s stock market listing, could be lost.

It comes as British defense company Meggitt, which produced parts used in Spitfire and Hurricane fighter jets during World War II, appears poised to sell £ 6.3bn, with a premium of £ 71. % compared to its pre-offer price.

US buyer Parker-Hannifin has agreed in principle to the Midlands firm, although a competing US suitor, TransDigm, has until September 14 to submit a higher bid.

The government has said it will “closely monitor” the Ultra deal, but shadow Labor Minister Chi Onwurah said ministers “should do more than make faint and vague noises to protect [companies such as Ultra]. «

“Serious questions remain about potential threats to national security, the new owners’ business model and future governance and operational freedoms,” she said.

“The Tories have repeatedly failed to protect UK businesses from takeovers that could jeopardize our national security and economic interests. Labor would introduce a strong takeover regime to support and grow our world-class industries. “

Lord Myners, the interbank peer who served as City Minister under Gordon Brown, said the government had been caught like a “bunny in the headlights” by the takeover bids, and American buyers with deep pockets were treating the world. British business as a hunter. ground.

He said promises made during takeovers were often broken. “These things aren’t binding, they don’t mean anything, and they’re normally time-bound,” Myners said. “I am concerned that we may not be able to give much weight to the consequences on the assurances given. “

Ultra Electronics and Meggitt are an integral part of UK Armed Forces operations, specializing in high-tech systems that deliver an advantage in the air, on land and at sea, through the detection of emerging threats.

This included systems to help detect improvised explosive devices and intercept communications in Afghanistan, where a 20-year intervention by the UK, US and other Western powers crumbles as the Taliban take over. control.

The UK government may block takeovers for several reasons, including any risk to national security, and has previously said it is monitoring the eventual deal closely.

However, Cobham has offered pledges which he hopes will secure government approval. These include ‘safeguarding and supporting the national security of the UK, including appropriate protections for UK sovereign capacity, continuity of supply and critical capabilities in the UK, as well as ‘an appropriate composition of the board of directors and national security agreements,’ he said.

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Pledges were also made to protect manufacturing jobs in the UK, invest in research and fund Cobham’s pension scheme. These promises would be followed up via a “forum” with government officials.

The buyout continues a buying frenzy in which deep-pocketed US private equity firms have bought or approached a range of UK companies including supermarkets Asda and Morrisons, roadside assistance company AA, infrastructure company John Laing and insurer LV =, among others.

A government spokesperson said: “National security is of paramount importance to this government, which is why we are introducing a new robust investment screening regime that will strengthen our powers to stop hostile actors while ensuring that the UK remains an attractive place to do business. “


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