Yahoo Finance US private equity raid on Ultra Electronics faces national security review
The private equity takeover of British defence supplier Ultra Electronics faces a national security review after the Business Secretary ordered civil servants to monitor the deal.
Kwasi Kwarteng is understood to be taking an “active interest” in Advent’s £2.6bn bid for the FTSE 250 contractor, and could order a review of the deal if it is formalised.
Ultra Electronics said last week it had received a £35 a share bid from Cobham, the defence contractor Advent took private last year, and was minded to recommend the deal to shareholders.
Cobham now has until August 20 to finalise its offer, which is expected to include national security undertakings and safeguards for major customers.
Ultra Electronics is a crucial supplier of sonar systems used by the Royal Navy and components for missiles. The deal has raised concerns both over the sovereignty of Britain’s defence supply chain and its manufacturing base, with the company employing around 1,700 staff in the UK.
Mr Kwarteng has the power to order a national security review into the deal as soon as it is formalised, a process that could take several months. He can also intervene in deals if they are seen as posing a potential national security risk. Further legislation signed into law last week will speed up reviews, but will not come into force until January.
A source close to the Business Secretary said: “Given the sensitivities of this proposed deal, the Business Secretary is definitely taking an active interest. While no decisions have been taken, we’ll continue to monitor the transaction closely.”
Advent’s ownership of Cobham has been controversial because the Boston-based private equity investor has sold the bulk of the company’s operations since paying £4bn for the company last year. Cobham has said the deal would have “strong industrial logic”.
Investors appear to have embraced the deal. Ultra Electronics shares rose by a third on Friday after the disclosure of Cobham’s bid, which was up from £28 a month earlier.
A Cobham spokesperson said: “Cobham continues to see strong industrial logic to the combination. During our discussions, we have offered assurances that appropriate national security undertakings will be offered to the UK Government. We look forward to continuing our discussions with the Board of Ultra, with the view to creating a global defence electronics champion.”
