The US-owned Aerospace and defense company Cobham has agreed to buy British company Ultra Electronics for £2.6bn, a deal that will be closely monitored by the UK government.
Cobham has announced that it is willing to take on and follow through with the guidelines given by HM Government in order to protect jobs for UK citizens.
It said “it would offer legally binding and enforceable commitments to HM Government” over the Ultra deal.
In 2019, defence and aerospace company Cobham was controversially bought by US private equity firm Advent despite national security concerns.
“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,” said Shonnel Malani, chairman of the Cobham Group.
The UK’s Business Secretary, Kwasi Kwarteng has reportedly considered launching a national security investigation into the deal last month under The Enterprise Act. This act gives the government power to intervene in mergers on public interest grounds covering National Security.
However, the Enterprise Act will no longer apply from January next year. Its replacement is a new National Security and Investment Act that has stricter protections on foreign ownership of British companies.
The new act will be more powerful in its ability to intervene if there are concerns about national security issues with any takeover.
It also has a wider remit that covers 17 business sectors and can probe investments of more than 25% if they cause concern, but crucially it could be used retrospectively for fines on companies or individuals.
As part of its takeover of Ultra – which has two sites in Dorset – Cobham said its commitments would cover “safeguarding and supporting the UK’s national security”.
The company has pledged to create and protect existing jobs and to increase investment in research and development in the UK.
Lord West of Spithead, who served as First Sea Lord, has also raised concerns about the Cobham-deal and a similar one involving British defence supplier Meggitt.
After announcing its £6.3 billion takeover by Ohio-based Parker Hannifin earlier this month, Meggit revealed that it had also been approached with an unsolicited bid from the US firm TansDigm for £7 billion.
The company announced it has given shareholders notice of a vote on the Parker Hannifin deal on 17th September.
TransDigm is now under pressure to make a decision on their offer of Meggitt by September 14th.
Meggitt’s chairman, Sir Nigel Rudd, called on ministers to block a takeover if any bidder tries to buy it without giving binding commitments on investment and jobs.
“While clearly, price is important, any new owner would need to give Meggitt and the government undertakings, including to keep the company’s headquarters in Coventry and maintain research and development spending,” he told the Sunday Times.
Meggitt specialises in components and sub-systems for the aerospace, defence and selected energy markets, and is one of the leading suppliers to a number of companies including Airbus and BAE Systems.
It also has contracts with the Ministry of Defence that Parker Hannifin has pledged to honour.
