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UK government opens national security investigation into £4bn defence deal

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Cobham is best known for its mid-air refuelling technology. Photo: David Brunnstrom/Reuters

The government has opened a probe into the proposed takeover of UK defence company Cobham (COB.L) by US private equity giant Advent International.

The Business, Energy, and Industrial Strategy department announced on Wednesday that it would investigate the deal on “ground of national security”.

FTSE 250-listed aviation and communications group Cobham is best known for its mid-air refuelling technology and has a major contract with the Royal Air Force (RAF). It has other government and public sector contracts, including supplying radios to UK emergency services. Around a quarter of Cobham’s business comes from the UK.

“Following careful consideration of the proposed takeover of Cobham, I have issued an intervention notice on the grounds of national security,” business secretary Andrea Leadsom said in a statement.

“As part of the statutory process, the Competition and Markets Authority will now investigate and carry out a review on the national security implications of the transaction. They must report back to me by October 29 2019.

“The government’s goals are to support private sector innovation whilst safeguarding the public interest.”

Advent has been circling Cobham for months and on Monday secured shareholder approval for the takeover.

However, the takeover has been controversial given Cobham’s role in supporting the UK’s critical infrastructure and fears that Advent could asset strip the business. Ruth Smeeth, a Labour MP and also a member of the Defence Select Committee, called for the government to intervene earlier this month and told the Mail on Sunday the deal was a “disgrace.”

Lady Nadine Cobham, whose late husband ran the business, has also called for the government to step in.

Cobham has struggled with a string of profit warnings in recent years and was engaged in a long-running dispute with Boeing that was resolved in February. The share price had crashed over 60% from its peak in 2015 prior to Advent’s bid in July.