Monday 16 August 2021 1:40 pm

Cobham and Ultra Electronics reach £2.6bn deal with UK jobs guarantee to assuage ministers

The boards of Cobham and Ultra Electronics have agreed terms of a £2.6bn takeover deal, that caused national security concerns for Business Secretary Kwasi Kwarteng last month.

Cobham said the board at defence and engineering firm Ultra had backed backed the 3,500p per share that values it at £2.57bn.

Shares in Ultra jumped out of bed, rising 4.45 per cent to 3,302p this afternoon on the news.

The terms and conditions of the takeover look to assure the UK Government that national security would not be compromised.

It follows a flurry of M&A in the UK’s defence and engineering sector that includes the puchased of Cobham itself by US private equity giant Advent in 2019.

Cobham said in a statement to the London Stock Exchange that it, if completed, the deal will invest “in Ultra’s UK work force by protecting existing and creating new UK manufacturing and engineering jobs and apprenticeships and maintaining a UK headquarters”.

Cobham said it “recognises the specific importance of Ultra’s contribution to the UK’s economy and national security”.

Following any deal being voted through by shareholders, Cobham said it will “engage proactively and collaboratively with HM Government to agree the detailed terms, duration, nature and form of these commitments, which would apply immediately from completion of the acquisition to protect the Ultra businesses and stakeholders following closing”.

Details would include safeguarding and supporting the UK’s national security, continuity of supply and critical capabilities in the UK, and national security clearance arrangements.

Business Secretary Kwarteng is said to have ordered officials to launch a national security investigation under the Enterprise Act.

The Act gives the Government the power to intervene in mergers on public interest grounds covering national security.

Dorset-based Cobham, which employs 10,000 people, is best known for technology enabling the mid-air refuelling of planes.

Under the deal, shareholders in Cobham would receive 3,500p a share in cash and a 16.2p-a-share dividend due next month.

The price is 63.1 per cent above Ultra’s closing price on 24 June before the first bid from Cobham – at 2,800p a share.

 Ultra’s CEO Simon Pryce, said: “This combination will enhance Ultra’s prospects through Cobham’s stated intentions to accelerate our transformation, invest in our technology, and to continue to support our customers, operations, communities, and most importantly our talented and committed people.

The combination will also create a defence electronics business of greater scale, bringing together two businesses with complementary technology, design, engineering and manufacturing capabilities, which we believe will enable the delivery of a broader range of integrated, cost competitive and high performance solutions across a wider range of platforms, benefitting our mutual customers and wider stakeholders.”

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