British aerospace giant Cobham has set its sights on the engineering company behind some of the UK’s most critical military equipment, paving the way for a potential hostile takeover bid.
The defence group, which itself was taken over by US private equity firm Advent International in a £4bn deal last year, said it was considering a bid for Ultra Electronics in an effort to create a “global defence electronics champion”.
Cobham said it was mulling a takeover offer or merging into Ultra in exchange for new shares.
In a statement Cobham said both companies “have long heritage as innovators, and share advanced complementary capabilities delivering mission critical solutions to the US, UK and other key allies”.
But the overtures sparked a robust response from Ultra, which said it had not received an offer from Cobham and was not actively considering a takeover deal
It confirmed it was in the “very early stages of exploratory discussions” about a potential merger of its communications division with Cobham but that it had since terminated the talks.
Shares in London-listed Ultra jumped almost seven per cent after news of the takeover talks broke on Friday, pushing its market valuation to £1.6bn.
The FTSE 250 firm, which specialises in equipment used in fighter jets and naval systems, is undergoing a turnaround plan under chief executive Simon Pryce.
Cobham’s interest in the company marks the latest example of private equity groups moving in on some of the UK’s biggest listed firms in the wake of the pandemic.
US-based Clayton, Dubilier & Rice this week made a £5.5bn takeover bid for supermarket giant Morrisons, while Lone Star backed out of a £840m deal with aerospace rival Senior.
Cobham, which is best known for its pioneering technology allowing planes to refuel mid-air, itself faced strong opposition to its 2019 takeover by Advent amid concerns over national security and a potential break-up of the group.