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September 18, 2019

UK Government to investigate Cobham sale on national security grounds

UK Business Secretary Andrea Leadsom is investigating a proposed deal that would see Advent International buy UK aerospace giant Cobham citing ‘national security’ concerns.

By Harry Lye

UK Business Secretary Andrea Leadsom is investigating a proposed deal that would see Advent International buy UK aerospace giant Cobham citing ‘national security’ concerns.

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The deal was approved by shareholders in UK-based Cobham last month, but the move from the government has now paused the deal.

Private equity firm Advent International made an offer of £4bn, or 165p per share to buy the British aerospace company.

The FT reported that despite the objections of the founding family, 93% of Cobham’s shareholders backed the bid. The deal was strongly opposed by Lady Cobham, the daughter-in-law of the company’s founder Sir Alan Cobham.

Leadsom said: “Following careful consideration of the proposed takeover of Cobham, I have issued an intervention notice on the grounds of national security.”

The deal is being blocked under the Enterprise Act 2002 which gives the British government the power to intervene in mergers on ‘public interest grounds relating to national security’.

Leadsom added: “As part of the statutory process, the Competition and Markets Authority (CMA) will now investigate and carry out a review on the national security implications of the transaction. They must report back to me by 29 October 2019.”

The CMA report will mean no deal can go through until the end of October to ensure national security implications of a proposed sale are fully assessed.

Advent reportedly wants to focus more on Cobham’s work on the US defence industry. The deal was criticised by several British politicians for a lack of scrutiny in the process.

In a letter to the Business Secretary in August, Liberal Democrat MP Chuka Umunna said: “Cobham’s largest shareholder, Silchester International, which owns 11.86% of the company has voiced its opposition to the takeover primarily because it believes it to be under-priced. This suggests one of the jewels in the crown of the UK’s industrial base is being sold on the cheap.”

Umunna added: “Cobham is a key part of several sectors in which the UK is a global leader.”

Over the past few years, Cobham’s future has been cast into doubt after the company issued several profit warnings; it had been in the process of successfully recovering.

Founded in 1934 Cobham employs around 10,000 people across its facilities and divisions including Cobham Mission Systems, Cobham Advanced Electronic Solutions, Cobham Communications and Connectivity and Cobham Aviation Services.

One of the companies leading defence solutions is aerial refuelling systems which are used by the majority of western fifth-generation fighter aircraft.

The UK government is also currently investigating the sale of proposes Bidco-Inmarsat merger on similar grounds; yesterday the CMA delivered its report on the merger to Leadsom, meaning a decision on that merger could be imminent.

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Free Report
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How attractive are current investment opportunities in Europe?

Europe has been identified as one of the most favorable regions for investors, seeing high investment activity in the past year. Most of these investments have been through Debt Offering, valued at close to $700 billion. The region has provided attractive investments in a diverse set of companies. Companies who tend to major themes such Digital Media, Cloud, Artificial Intelligence, E-commerce, and Big Data are recording the highest number of deals, with Digital Media recording close to 2,000 deals. However, GlobalData’s whitepaper offers a full view of the market, analyzing less successful or attractive points of investment as well, examining statistics on Equity Offering investments and PE/VC deals. Understand how government agencies for economies around the world use GlobalData Explorer to:  
  • Track the M&A and Capital Raising volumes into their target market
  • Identify the top sectors in the target market attracting the investments
  • For any investment segment, identify the top Investors inside and outside the target economy that are already investing in the Segment
  • Assess and showcase the growth potential for various Industries in the target economy
Don’t miss out on key market insights that can help optimize your next investment – read the report now.
by GlobalData
Enter your details here to receive your free Report.

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