The UK government is willing to take control for £ 2.6 billion from a British defense manufacturer in a deal that will bring a US private equity investor closer to controlling a major supplier of nuclear submarine equipment.
Cobham has been given the green light to take over Ultra Electronics, a FTSE 250 manufacturer of systems such as sonar and radio communications used by the Navy and Air Force, as well as civilian aircraft. Cobham was controversially taken over and broken by US private equity investor Advent in 2019 and 2020.
Business Secretary Kwasi Kwarteng announced on Thursday that he is “thinking of accepting the commitments offered” by a Cobham / Advent investment vehicle to address national security issues.
The government intervened in the deal in August last year, amid concern over a number of approaches for British defense and aerospace manufacturers during the aftermath of pandemic blockades. In addition to Ultra, the government is also considering a £ 6.3 billion acquisition of Meggitt, the fighter and wheel manufacturer for fighter jets, by US aerospace group Parker Hannifin, and the £ 5.4 billion deal. free for the satellite company Inmarsat by the American rival Viasat. .
Under the terms announced Thursday, Cobham will have to create two “SecureCos” to house “sensitive capabilities.” The government will have a seat on the boards of directors of these companies and will have the approval of their statutes.
Above all, the government will also have “entry rights,” which would allow it to take control of SecureCos for national security reasons. The government compared this to a “special stake” that allows it to reject the strategy changes of BAE Systems and Rolls-Royce, the UK’s two largest arms suppliers.
Kwarteng’s decision on the implications of the agreement for national security is independent of any economic considerations, although it is not believed likely that the government will require large concessions from Cobham in this regard.
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Lady Cobham, the daughter-in-law of Cobham founder Alan Cobham, told the Mail on Sunday last week that Kwarteng should prevent the UK from “auctioning off” its defense capabilities, and Labor have also previously expressed their concern over the sale of British defense companies.
Shhamel Malani, president of Cobham, said the decision was “a positive step for investment in Ultra and the Five Eyes alliance”, referring to the intelligence exchange agreement between Australia, Canada, New Zealand, the United Kingdom and the United States.
“We have always been clear about our unwavering commitment to ensuring that the national security of the UK is protected and we believe that such broad and solid companies will do just that,” he said.