UK plc up for sale under Johnson's Tories as controversial Cobham takeover makes clear

The deal looks set to be passed with only weak safeguards despite national security and industrial strategy concerns and opposition from the founding family and MPs 

James Moore
Chief Business Commentator
Tuesday 19 November 2019 11:47
Cobham pioneered air to air refuelling
Cobham pioneered air to air refuelling

Boris Johnson’s government is terribly fond of chest beating, flag waving and banging on about the importance of being a “sovereign independent nation”.

Its actions tell a rather different story. This morning it emerged that the Business Secretary Andrea Leadsom is set to approve the takeover of defence contractor Cobham by US buyout group Advent International.

Cobham is an important company, which has had its troubles. It was a pioneer in air to air refuelling, supplies radar and other electronic products for the aviation and defence industries, makes components for Airbus jets, is involved in satellite communications and employs more than 10,000 people.

After a miserable period in which it coughed up five profit warnings, the business had been showing signs of revival when Advent swooped with a £4bn, 165p a share offer, representing a 34 per cent premium to the closing price prior to the announcement.

In the process it has generated opposition from the founding family, former executives, and MPs among others, and with good reason. Cobham is an important company both strategically and from an industrial standpoint. In a chilly post Brexit world, it’s the sort of business Britain will need and ought to be encouraging.

But while it’s hard to find anyone buzzing with enthusiasm for the offer (the price is hardly a knock out) it managed to secure the support of the Cobham board. There was some twittering from institutions but that’s usually enough to bring them in line. When push come to shove they inevitably put a short term bung ahead of long term potential. Private equity funds have a wall of money behind them and their life is being made easy by dint of the willingness of the people who manage our pensions and investments sell up cheap.

None of this absolves the government of the responsibility for throwing another serviceable British company under the bus.

Leadsom has announced that she has secured a number of undertakings and that she's minded to pass the deal if they're agreed to (subject to consultation).

Advent will have to ensure existing that security arrangements protecting sensitive operations and information “will continue to be strengthened”. Any new board structures will have to comply with national security requirements. The terms of existing contracts will have to be honoured (well duh) and the Ministry of Defence will have to be notified if there is any change change to Cobham’s ability to supply key services. There's a promise not to withdraw others for an agreed period and to put in a call to the MoD if it plans to sell up.

That doesn’t sound like much and it isn’t. The phrase "window dressing" rather comes to mind. When Melrose, another buyout firm, but this time based in Britain, gobbled up GKN Leadsom's predecessor Greg Clark secured a rather stronger menu of remedies including the right to veto the disposal of sensitive defence assets.

When push comes to shove, however, it’s clear Johnson and his cohort will always put expediency ahead of British interests, particularly when the it’s backed by the dollar.

Remember that when they claim that the NHS isn’t for sale. As far as they’re concerned, the whole country is on the auctioneers block as this makes all too clear.

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