Business Secretary Kwasi Kwarteng has stopped the planned £2.6bn acquisition of defence firm Ultra Electronics by rival US-owned Cobham, to investigate possible national security risks from the merged entities.
The Competition and Markets Authority will now prepare a report on the proposed transaction.
Customers of Ultra, which sells torpedo and radar systems and a range of defence communication equipment, include Washington and London.
Cobham earlier this week pledged to address concerns over potential national security implications of its takeover of Ultra when it announced a deal had been inked between the companies on Monday.
Under the Enterprise Act, foreign takeovers of UK-owned companies can be “called in” on grounds of national security, financial stability or media plurality.
“The UK is open for business, however foreign investment must not threaten our national security,” Kwarteng said this evening.
Any deal now won’t be confirmed until next year with the government setting a deadline for the report of 18 January 2022.
Kwarteng said he would seek to stop Ultra from disclosing sensitive information to Cobham about the goods or services it provides to the UK government and its armed forces.