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Break-up of nuclear sub contractor to start within months of US takeover

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Ultra Electronics technology is used in Britain's Trident nuclear submarines - James Glossop/The Times/PA Wire
Ultra Electronics technology is used in Britain's Trident nuclear submarines - James Glossop/The Times/PA Wire

The break-up of one of Britain's most sensitive defence companies will begin as soon as this year if a US takeover is signed off by the Government.

Parts of Ultra Electronics will be offloaded within months by Boston-based Advent International if its £2.6bn sale is approved by the Business Secretary Kwasi Kwarteng, insiders said.

Advent intends to launch an immediate strategic review of Ultra — which provides secret kit to Britain's nuclear submarines — before pressing ahead with the sale of non-defence operations that it owns.

About 10pc of Ultra’s sales come from its energy business and a forensics division in Canada, and Advent earmarked these as potential sales targets in August.

Mr Kwarteng gave the takeover tentative approval last week following a national security review that sparked a transatlantic row, with US intelligence sources warning defence cooperation would be put at risk if the sale was blocked.

A consultation will run until 3 July so that other defence players can give their views, and no final decision will be made until this process is complete.

The most sensitive parts of Ultra have been afforded heavy protection in a series of legally binding promises Advent has made.

But since UK sales now contribute less than 20pc of the company’s revenues, while the US Department for Defence has grown as a customer, the protected parts are understood to be a minority of the business.

Advent has offered to place Ultra’s top-secret businesses into two separate legal entities. These will each have a government-appointed director to protect British national security interests, and report to the state if the company tries to sell or pare back services important to defence.

As reported by the Telegraph in February, Britain will have powers to seize control of important operations if deemed necessary, and on top of that promise, at least half of the directors of the board of the company will be British, as will its chairman.

Ultra is Advent’s second major defence deal in recent years after the company picked up Cobham, which was known for its air to air refuelling systems.

Advent came under fire from Cobham's founding family, politicians and military leaders after selling various parts of the business in the months after the deal.

The agreement with Ultra is being hailed as much stronger than prior undertakings, such as a “good custodian” pledge Advent made ahead of its Cobham deal.

Insiders insist the defence parts of Ultra will be kept for the long term, especially since military spending is likely to be ramped up by many of its clients.

Mr Kwarteng ordered the Competition and Markets Authority to investigate the deal last August. It reported back in January and until last week, the deal had been largely in limbo.

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