Defence tech firm acquired in £2.6bn deal - CMA to investigate [UPDATED]

British defence tech supplier Ultra Electronics has been acquired by UK company Cobham Group, a wholly owned subsidiary of US private equity firm Advent International, in a £2.6 billion deal. Under the deal, which values the company at around an 8x multiple of its £325.1 million 2020 revenue, Ultra shareholders will each receive £35 per share.

Ultra Electronics is a key Royal Navy supplier and, as such, the sale to a foreign entity has prompted calls for government scrutiny of the transaction over concerns including national security. The government said that the sale was “a commercial matter for the companies involved” but added that it was “closely monitoring the transaction”.

Similar concerns surrounded Advent’s $5 billion (£3.6 billion) 2019 takeover of the formerly British-owned Cobham. That transaction was ultimately approved by the government after Advent made a number of commitments to ease concerns. However, since then, Advent has sold off some parts of the firm.

Ultra supplies electronics, including warship and submarine sonar systems and underwater sonobuoys, to the Royal Navy. The company also works directly and through contractors with other providers in sectors including aerospace and critical infrastructure.

Commenting on the sale, Simon Pryce, Chief Executive of Ultra Electronics, said: “Today’s offer from Cobham reflects the significant progress and value that has been created by the whole Ultra team from our ONE Ultra strategy and from the progress we are making on our Focus; Fix; Grow transformation. The team should be very proud of what they have achieved so far.

“This combination will enhance Ultra’s prospects through Cobham’s stated intentions to accelerate our transformation, invest in our technology, and to continue to support our customers, operations, communities and most importantly our talented and committed people.

“The combination will also create a defence electronics business of greater scale, bringing together two businesses with complementary technology, design, engineering and manufacturing capabilities, which we believe will enable the delivery of a broader range of integrated, cost competitive and high-performance solutions across a wider range of platforms, benefitting our mutual customers and wider stakeholders.”

Cobham Group Chairman Shonnel Malani added: “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.”

UPDATE - August 19th

It was announced yesterday afternoon, August 18th, that Cobham's takeover of Ultra Electronics will be investigated by the Competition and Markets Authority (CMA), after Business Minister Kwasi Kwarteng instructed the regulator to examine the deal on national security grounds.

Writing on Twitter, Kwarteng said: This afternoon, I instructed [the CMA] to investigate the proposed acquisition of Ultra Electronics by Cobham to assess any national security concerns. The UK is open for business, however foreign investment must not threaten our national security."

"I’ve also tabled an Order in Parliament preventing Ultra from disclosing sensitive information to Cobham about the goods or services it provides to HM Government or HM Armed Forces," Kwarteng added.



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