Cobham and Ultra Electronics’ boards of directors have agreed on the conditions of a £2.6 billion acquisition deal that raised national security concerns for Business Secretary Kwasi Kwarteng last month. According to Cobham, Ultra’s board of directors has approved a price of 3,500p per share, valuing the company at £2.57 billion.
Ultra’s stock leapt out of bed this afternoon, surging 4.45 percent to 3,302p on the announcement. The takeover’s terms and conditions appear to reassure the UK government that national security will not be jeopardised. It comes after a rush of M&A in the UK defence and engineering jobs sector, including the acquisition of Cobham by US private equity firm Advent in 2019.
In a statement to the London Stock Exchange, Cobham said that if completed, the deal will invest “in Ultra’s UK workforce by protecting existing and creating new UK manufacturing and engineering jobs and apprenticeships and maintaining a UK headquarters”.
Cobham said it “recognises the specific importance of Ultra’s contribution to the UK’s economy and national security”.
Following any deal being voted through by shareholders, Cobham said it would “engage proactively and collaboratively with HM Government to agree the detailed terms, duration, nature and form of these commitments, which would apply immediately from completion of the acquisition to protect the Ultra businesses and stakeholders following closing”.
The safeguarding and support of the UK’s national security, the continuity of supply and essential skills in the UK, and national security clearance requirements would be among the details.
Under the Enterprise Act, Business Secretary Kwarteng is claimed to have directed officials to initiate a national security probe. The Act empowers the government to interfere in mergers in the public interest, including national security concerns.
Cobham, situated in Dorset, is well renowned for its technology that allows planes to be refuelled in mid-flight. Cobham shareholders will receive 3,500p in cash and a 16.2p-a-share dividend due next month as part of the agreement.
Ultra’s CEO, Simon Pryce, said: “This combination will enhance Ultra’s prospects through Cobham’s stated intentions to accelerate our transformation, invest in our technology, and 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.”
Source: City A.M.