Private equity dives into British defense giant Ultra Electronics

Ultra Electronics could become the latest UK company to fall into private equity after being the target of a £2.6bn takeover attempt.

The defense group’s board said it was willing to support the 3500p-per-share offer from US buyout firm Advent.

Advent’s approach came through Cobham, another British defense company it bought last year in a hotly contested deal.

Swoop: Ultra’s ‘sonobuoys’ can be dropped from Merlin helicopters (pictured) and Poseidon planes to help detect objects in the ocean

Under the proposal, Ultra chairman Tony Rice and chief executive Simon Pryce will receive approximately £700,000 and £770,000 respectively for shares they own.

However, any deal is likely to lead to an official review due to the highly sensitive technology Ultra provides to the armed forces, especially the Royal Navy.

Also a major supplier to the United States Armed Forces, the company’s pioneering naval systems are used by the Navy to patrol British waters, hunt submarines and protect aircraft carriers, among other things.

In an effort to ensure the deal goes through, Advent has said it is willing to make national security commitments.

But the company’s relentless dismantling of Cobham after taking over the company just 18 months ago is likely to spark fears for jobs at Ultra and the UK defense supply chain, should the sale be approved. The attack on Ultra comes as private equity groups scour the UK for deals with supermarket chains Asda and Morrisons and security firm G4S among the targets.

Sir Gerald Howarth, a former Tory defense minister, said the takeover went “to the heart of Britain’s defense capabilities” and should be tightly controlled by the government.

He said: ‘This is a company that is vital to the Royal Navy and to the protection of our aircraft carriers. When it comes to defending the empire, we just can’t have a free-for-all where city financiers attack critical businesses, split them up and then thrash them to the highest bidder.

‘So ministers absolutely have to intervene. Given everything that has happened in Cobham, we have to act very hard.”

Admiral Lord West, the former head of the Royal Navy, also warned against ‘giving up the UK’s sovereign capacity in areas important to the nation’s security’. “Ultra makes some really important things, advanced technology that allows us to beat our opponents,” he told the Telegraph. “It’s extremely disturbing that the government says we have sovereign capacity — whether it’s defense or areas like us, the ability to make drugs in times of need — but again, it looks like property will go to the Americans.” .’

Under the latter approach, Cobham has until August 20 to make a formal offer for Ultra under the “put up or shut up” rules.

Shares in Ultra were up 32.4 percent, or 800p, to a record 3270p.

Advent says Ultra and Cobham, which makes electronic warfare and missile devices, want to merge to create a “global champion in defense electronics.”

In response to the 3,500 pence offer, Ultra said that after considering the proposal, “the board of directors has indicated to Cobham that it is a value that the board would intend to recommend to Ultra shareholders, subject to consideration.” and satisfactory resolution of other terms and conditions’.

The Ultra spokesperson said Cobham “has indicated its willingness to make appropriate commitments to the UK government with regard to national security”.

Howard Wheeldon, an independent defense analyst, said it was likely that an assessment by the UK and other governments would have to be carried out before the deal could go through.

A Cobham spokesperson said: “Cobham welcomes the announcement of the Ultra Electronics board. We have given assurances that appropriate national security measures will be offered to the British Government.”

World leader

Ultra Electronics is the world leader in sonar, radar and torpedo technologies widely used by Western countries in the Five Eyes intelligence-sharing partnership.

Established in 1920, the company’s sonar systems are used on a plethora of ships and aircraft to hunt submarines and patrol British waters.

Ultra’s ‘sonobuoys’ can be dropped from Merlin helicopters and Poseidon planes to help detect objects in the ocean.

And the company’s pioneering maritime systems are used aboard the Royal Navy’s Type 23 frigates, Type 45 destroyers and Queen Elizabeth-class aircraft carriers.

‘Step up and protect the industry’

Lady Cobham last night called on the government to act and protect what is left of Britain’s manufacturing base.

Plea: Lady Cobham

Plea: Lady Cobham

Cobham, the company founded in 1934 by her father-in-law, the celebrated aviator Sir Alan Cobham, was bought by Advent last year.

The deal was opposed by Lady Cobham, who warned that the acquisition would lead to the breakup of the company and the loss of key technologies for foreign owners.

Her grim prediction has since come true.

Advent broke Cobham into nine pieces and sold many of them, including the once esteemed air-to-air tank company.

Last night, Lady Cobham said: ‘Advent has broken up Cobham and sold most of it, despite promises to the government that it would invest in the company and protect jobs. Now is the time for the government to act and protect what is left of our defense manufacturing base.”

Advent insists Cobham has “performed strongly” under its ownership and has invested more than £250m in research and development.

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