As the acquisition battle against one of the UK’s top defense companies intensifies, S-owned Cobham is today closer to acquiring Ultra Electronics for £2.6 billion.
The board of FTSE250 fighter and missile component manufacturer Ultra’s board stated that it “intended” Cobham to make a cash offer of 35 pounds per share, and the company approached it for the first time last month with an initial price of 28 pounds.
Cobham is a defense and aerospace group headquartered in the United Kingdom. It was acquired by Boston private equity giant Advent International for 4 billion pounds last year, which will exacerbate concerns about private equity supporting the acquisition of UK listed companies.
Critics warned that the UK could lose many of its most promising companies to foreign buyers due to concerns about the impact on national security and the loss of overseas technology and expertise.
Advent’s purchase of Cobham for £4 billion was opposed by the founder’s family and other executives. They believed it was against the interests of the UK and urged the government to stop it.
Ultra and Cobham, with 4,500 employees, are both parts suppliers for F-35 and European Typhoon fighter jets, which will be used in the Royal Navy’s two new aircraft carriers.
Ultra Electronics also specializes in equipment used in naval systems, such as sonar, and Cobham’s air-to-air refueling technology is widely used by air forces in several Western countries.
In a statement, London-based Ultra stated that the offer was a 42% premium to its previous closing price and was “in line with the value the board is willing to recommend to Ultra shareholders” and it is now seeking Cobham’s guarantee to pave the way for the transaction.
“Cobham has indicated to the board of directors that it intends to provide the British government with appropriate commitments regarding national security. Therefore, the board will discuss the proposal with Cobham in further detail.”
The transaction follows a series of controversial acquisitions of UK-listed companies, including supermarket group Morrison, which is being acquired by a group led by US private equity firm Fortress.
American technology giant Nvidia is also seeking to acquire Arm Holdings, a British microchip developer.
Advent said last month that the merger of Cobham and Ultra will create a “global defense electronics champion” that will provide professional equipment to the armed forces of the United States, the United Kingdom and other countries.
An Advent spokesperson said: “Despite the pandemic, Cobham has performed strongly under Advent’s leadership, with revenue growing 6% year-on-year in 2020.
“More than US$350 million has been spent on R&D and strategic investment.
“The business now focuses more on high-tech electronic products and has won important contracts for commercial satellites, government space programs, and next-generation defense electronics.”
