UK government set to approve $4bn Cobham takeover

UK government set to approve $4bn Cobham takeover

Final decision set to be made after public consultation on US private equity firm Advent’s national security commitments closes on December 17

UK government set to approve $4bn Cobham takeover

The UK government is poised to give the green light to the $4 billion takeover of defence company Cobham by US private equity firm Advent.

The potential deal for the company, one of the oldest names in British aerospace, was originally announced in July, but was called in while Business Secretary Andrea Leadsom established whether it would pose a risk to national security.

The UK government says it is now “minded” to accept the deal, following a number of legally binding commitments made by Advent and following further advice from the Ministry of Defence (MOD). These include placing a number of British executives on Cobham’s board, strengthening security at sensitive locations and informing the MOD if the company decides to sell Cobham in future.

No final decision will be taken until after the governent runs a public consultation on Advent’s proposals which will close on December 17. 

Final decision will follow close of public consultation

Business Secretary Andrea Leadsom said: “Following my update to Parliament on November 5, I have now reviewed further national security advice from the MOD and met with both Cobham and Advent who have offered legally-binding undertakings designed to mitigate national security concerns, which I am minded to accept.”

“They will now be considered by a public consultation and I will provide a further update once that process has concluded. No decision will be taken on whether to accept the undertakings until the consultation has closed and the representations have been carefully considered.”

Cobham produces technology utilised in aircraft, including the F-35 Joint Strike Fighter and Eurofighter Typhoon, as well as in advanced naval vessels, satellites and military vehicles. The company currently employs around 10,000 people worldwide with around 1,700 based at the company’s headquarters in Dorset.

Concerns about the takeover were raised as Cobham as supplies air-to-air refuelling services to the Royal Air Force. The company also manufactures parts for Lockheed's F-35 fighter jet, which is supplied for both the RAF and the Fleet Air Arm and civil and space applications including parts for the International Space Station.

Critics dub deal as “strategic madness”

Critics of the deal include Lady Nadine Cobham, widow of the former chairman, Sir Michael Cobham who warned the government the deal could result in a loss of jobs and skills in the UK and represented a “hollowing out” of the UK defence industry.

Secretary of State for Defence in Margaret Thatcher's government, Lord Heseltine said "no other country in the world" would allow such a takeover to go through without a proper investigation. Former First Sea Lord Lord West has dubbed the takeover "strategic madness" and former Cobham chief executive Gordon Page claims the deal undervalues the company.

Shonnel Malani, partner at Advent, was reported commenting on the potential deal by Sky News. He said: "We have worked closely with the Ministry of Defence to construct undertakings that would adequately mitigate against any potential national security risks and we welcome today's decision by the secretary of state to propose to accept those undertakings, subject to consultation."

Deal has backing of 93 per cent of Cobham shareholders

In an open letter published in The Times newspaper and Cobham’s website last month, Chairman Jamie Pike writes: “The Board of Cobham believes that the acquisition by Advent will create significant opportunities for Cobham to better serve its customers.”

The letter adds that the potential takeover had won the backing of 93 per cent of Cobham shareholders when put to the vote in September and that the global business was “dominated” by the US market.

He added: “Cobham’s major customers are used to working with private equity-owned companies in their supply chain. Advent’s track record is that of a complementary partner for customers and we believe that it fully understands what is required to serve Cobham’s customers successfully.”

“This is an important moment for Cobham, one which will define its future, unlocking opportunities for growth, job creation and benefits for all of its stakeholders.”

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