The government is set to wave through the £4bn takeover of the British defence company Cobham by Advent after the US private equity group offered to address national security concerns.
The business secretary, Andrea Leadsom, on Tuesday announced that the government would consult on legally binding steps to be taken by Advent, adding she was “minded to accept” the undertakings – despite objections expressed to competition regulators by unnamed parties about the private equity firm’s potential short-term hunt for profits.
Advent International and Cobham announced the all-cash deal on 25 July, but the government intervened on 17 September. The MoD expressed concerns that the takeover could expose military information held on Cobham’s systems and that key capabilities could be undermined if Advent decided to exit parts of the business.
Cobham, which specialises in the air-to-air refuelling technology used by UK and US military jets, is a supplier to the Ministry of Defence as well as making a broad range of systems for aviation and space industries. However, the Dorset-based company, which employs about 10,000 people worldwide, only earns about 8% of its revenues in the UK.
The company’s new owners will be prevented from withdrawing from important military services for five years, as well as ensuring that board structures keep British nationals in charge of key defence services.
Advent will also have to give the Ministry of Defence prior notice if it plans to sell on all or part of Cobham.
A redacted report by the Competition and Markets Authority (CMA) that was also published on Tuesday showed that four unnamed third parties had said Advent was not a suitable owner of crucial national security capabilities, including the air-to-air refuelling services, because it was a private equity company with a short-term view to make a profit by selling off or breaking up the business.
The government will not make a final decision on whether to accept the takeover until after a consultation on the undertakings has been completed on 17 December.
Leadsom said: “I have now reviewed further national security advice from the MoD and met with both Cobham and Advent who have offered legally binding undertakings designed to mitigate national security concerns, which I am minded to accept.”
Shonnel Malani, a partner at Advent, said: “Following the CMA’s review, we have worked closely with the Ministry of Defence to construct undertakings that would adequately mitigate against any potential national security risks and we welcome today’s decision by the secretary of state to propose to accept those undertakings, subject to consultation.”