UK defence giants Ultra and Meggitt a step closer to foreign ownership

US private equity-backed Cobham confirms a £2.57bn price tag for Ultra, and Meggitt sets a date for shareholders to vote on a Parker-Hannifin deal

Cobham and Ultra have agreed terms on a takeover (Ultra Electronics/PA)

Two British defence companies are a step closer to being taken over by foreign-backed firms.

Cobham Group, which is owned by US private equity house Advent, confirmed it has agreed a £2.57billion deal for London-listed Ultra Electronics.

And rival defence group Meggitt reaffirmed its plans to accept a £6.3billion bid from US business Parker-Hannifin and said the stock market’s Takeover Panel will set a deadline on another rival, TransDigm, to make its own £7billion bid binding.

Following the Meggitt announcement, the Takeover Panel confirmed that TransDigm has until 5pm on September 14 to make a bid or walk away.

Bosses behind the Cobham bid for Ultra Electronics also said they would agree to binding commitments to the UK Government which has been looking into the deal.

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

Shonnel Malani, Cobham chairman

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.

The company added that it would protect existing jobs and invest in research and development to create new ones in UK manufacturing and engineering positions.

Ultra would also keep its headquarters in the UK, it added, and the Government will have an “ongoing dialogue, co-operation and monitoring” position to ensure the commitments are upheld.

Business Secretary Kwasi 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.

The Ultra board has... spent considerable time reviewing the potential impact of Cobham's ownership on Ultra's stakeholders and is comfortable that their stakeholder commitments plus legally binding undertakings to HM Government will protect stakeholder interests appropriately

Tony Rice, Ultra

Under the deal, shareholders in Ultra would receive £35 a share in cash and a 16.2p-a-share dividend due next month.

The price is 63.1% above Ultra’s closing price on June 24 before the first bid from Cobham – at £28 a share.

Cobham said the deal would help both businesses complement each other through design, engineering and manufacturing.

The board will now ask shareholders to vote on the deal and must secure the support of 75%.

Shonnel Malani, chairman of the Cobham Group, said: “We believe Cobham and Ultra’s complementary capabilities delivering mission-critical technology will be significantly enhanced through the combination of the two groups, enabling the development of higher performance solutions for our customers.”

He added: “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.”

Tony Rice, chairman of Ultra, said: “The Ultra board has… spent considerable time reviewing the potential impact of Cobham’s ownership on Ultra’s stakeholders and is comfortable that their stakeholder commitments plus legally binding undertakings to HM Government will protect stakeholder interests appropriately.

“The Ultra board therefore unanimously intends to recommend the Cobham offer to shareholders.”

At Meggitt, the board said shareholders will be asked to vote on its proposed takeover on September 17 but suggested this could be delayed if TransDigm makes its own bid binding.