UK defence giant Ultra agrees to £2.6bn Cobham takeover

Ultra Electronics, a major supplier to the Royal Navy, has agreed to be bought by US-owned Cobham in a £2.6bn takeover being monitored by the UK government.

Cobham said it would "offer legally binding and enforceable commitments to HM Government" over the Ultra deal.

These include security issues and protecting UK jobs.

Defence and aerospace company Cobham was controversially bought by US private equity firm Advent in 2019 despite national security concerns.

"We look forward to working with HM Government, and other relevant stakeholders, to agree legally binding commitments which safeguard Ultra's contribution to the UK economy and national security," said Shonnel Malani, chairman of the Cobham Group.

The UK's Business Secretary, Kwasi Kwarteng, was reported to be considering launching a national security investigation into the deal last month under the Enterprise Act.

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

However, the Enterprise Act will be superseded from January next year by the new National Security and Investment Act, which aims to impose more stringent safeguards on foreign ownership of British companies.

The new act will introduce stronger powers of intervention if there are concerns about national security issues in any takeovers.

It will also have a wider remit covering 17 business sectors and will probe any investments of more than 25% in a UK company that cause concern. Crucially, it could be used retrospectively to fine firms.

As part of its takeover of Ultra - which has two sites in Dorset - Cobham said its commitments would cover "safeguarding and supporting the UK's national security" including national security clearance arrangements.

It has also pledged to protect existing and create new UK manufacturing and engineering jobs, and to increase investment in research and development (R&D) in the UK.

Lord West of Spithead, who served as First Sea Lord, has also raised concerns about the Cobham-Ultra deal and a similar one involving British defence supplier Meggitt.

Meggitt announced it had agreed a £6.3bn takeover by Ohio-based Parker Hannifin earlier this month but then revealed it was the subject to an unsolicited £7bn bid approach from US firm TansDigm.

On Monday, it gave shareholders notice of a vote on the recommended Park Hannifin deal on 17 September.

TransDigm has now been given a deadline of 14 September by the UK Takeover Panel to make a formal offer for Meggitt.

Meggitt's chairman, Sir Nigel Rudd, called on ministers to block a takeover if any bidder tries to buy it without giving binding commitments on investment and jobs.

He told the Sunday Times that while "clearly, price is important", any new owner would need to give Meggitt and the government undertakings, including to keep the company's headquarters in Coventry and maintain R&D spending.

Meggitt specialises in components for the aerospace, defence and energy industries. Companies that it supplies include Airbus and BAE Systems, but it also has contracts with the Ministry of Defence that Parker Hannifin has pledged to honour.

There has been a number of sales of UK defence sector businesses to US firms, ahead of the probable Ultra and Meggitt deals.

This month Frazer-Nash Consultancy, a defence engineering consultancy working on Britain's nuclear submarines and weaponry for the Royal Navy, was sold by UK's Babcock International to US group KBR for £293m.

Cobham - based in Wimborne, Dorset - was bought by US private equity firm Advent at the end of 2019 for £4bn. It is famed for its air-to-air refueling kit which played a significant role in the Falklands War, allowing the Royal Air Force to attack the remote Port Stanley airfield.