UK to probe Cobham's bid for Ultra Electronics

An Ultra Electronics building in Rugeley, UK. (Ultra Electronics)

UK Business Secretary Kwasi Kwarteng has directed his country's Competition and Markets Authority (CMA) to review Cobham Group's proposed acquisition of Ultra Electronics, citing potential “national security concerns” about the deal, the UK government announced on 19 August.

The CMA will have until 18 January to complete its work and report its findings to Kwarteng, according to the Department of Business, Energy, and Industrial Strategy (BEIS). The secretary will then decide whether to clear the merger with or without conditions or instruct the CMA to conduct a more in-depth “Phase 2” investigation.

Kwarteng did not say what national security concerns he might have. However, while Cobham and Ultra are both based in the United Kingdom, Cobham is owned by US private equity firm Advent International. Advent has raised eyebrows by divesting several Cobham businesses since it acquired the company in January 2020.

“The UK remains firmly open for business; however, we have been clear that foreign investment must not threaten our national security,” a government spokesperson said.

Cobham has indicated it is willing to address any concerns that policymakers might have about its Ultra takeover. As part of its GBP2.6 billion (USD3.6 billion) offer, Cobham has agreed to work with the UK government to ensure the deal protects capabilities that are critical to the UK national security.

The potential transaction has been percolating for months. Cobham announced in late June that it was exploring a combination to create a “global defence electronics champion”. Cobham submitted an offer in late July, prompting BEIS to indicate it was “closely monitoring” the proposed transaction.