Cobham eyes potential disposals after agreeing £2.57bn Ultra takeover deal

Military technology supplier Ultra Electronics faces a potential disposal of part of the business after agreeing to a £2.57bn takeover by US-owned defence group Cobham – a deal being closely scrutinised by the government.

Cobham said it would seek to agree legally-binding commitments with the government to safeguard UK national security and jobs as part of the deal.

But it also revealed that Ultra’s energy and forensics divisions – possibly seen as not being part of its core aerospace and defence focused work – could be sold.

A review of the business after the takeover completes may also see job losses as a “limited number of corporate and support functions” are axed.

However, Cobham said there were “no plans to undertake any material restructurings or change in the locations of Ultra’s manufacturing or research and development facilities” other than “pursuant to internal reorganisations” or as set out under existing plans.

Ultra, which counts the UK and US governments amongst its customers, undertakes highly sensitive work such as the provision of advanced submarine-hunting sonar, and supplies military programmes including Typhoon fighter jets.

The UK-listed group, which employs more than 4,600 people across the globe – including about 1,700 in the UK – said last month that it was “minded” to recommend a takeover offer from Cobham.

Cobham was itself controversially taken over last year by US-based private equity firm Advent International.

The latest takeover has faced opposition because of Cobham’s approach to breaking up and selling off parts of the group adopted by its owner Advent since that deal was concluded.

Sky News revealed last month that business secretary Kwasi Kwarteng had ordered officials to launch a national security probe into the Ultra transaction.

In a statement on Monday announcing agreement on the deal, Cobham said it would offer legally-binding commitments to safeguard UK national security, create new manufacturing and engineering roles and apprenticeships, and protect existing ones.

There will also be a pledge to maintain a UK headquarter and boost investment.

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

It said it would engage in talks with the UK government to “agree the detailed terms, duration, nature and form of these commitments”.

The takeover is expected to complete at the start of next year subject to approval by regulators around the world.

Cobham said it had “not yet had access to sufficiently detailed information to formulate specific plans regarding the full impact of the acquisition on the Ultra group” and that it would carry out a detailed evaluation after the completion.

As part of this it will consider whether Ultra’s energy unit – which supplies nuclear safety sensors and systems – and its forensics division – which help law enforcement agencies around the world – would be considered as possible “candidates for disposal”.

“Any such decisions would only be taken in the light of the views of key stakeholders, including key government and other customers, and would be subject to the suitability of any potential buyers and the satisfaction of applicable regulatory approvals and conditions,” it said.

Cobham said the energy and forensics divisions together in 2020 represented less than 10% of the group’s revenues.

The deal comes as Ultra’s larger rival, Meggitt, is the subject of takeover interest and has received bids from US companies Parker-Hannifin and TransDigm.

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