U.K. Defense Deals Advance as Ultra Accepts Cobham Takeover

(Bloomberg) -- Ultra Electronics Holdings Plc accepted a 2.57 billion-pound ($3.6 billion) buyout by Cobham Ltd. as U.K. defense and aerospace takeovers come back into focus following a pause at the height of the coronavirus crisis.

The British firms said Monday that they’ve reached agreement on an all-cash deal valuing Ultra at 35 pounds a share. Coventry, England-based Meggitt Plc meanwhile set a date for investors to vote on a 6.3 billion-pound purchase by Parker-Hannifin Corp., after pushing back against a rival approach.

The Ultra accord advances a flurry of merger activity in U.K. defense as private-equity firms tap into free-flowing capital. Cobham was itself acquired by U.S. buyout firm Advent International Corp. in January 2020, while Meggitt is also being pursued by TransDigm Group Inc., formed in 1993 as part of a PE-led deal. Senior Plc rejected a $1.2 billion bid from Lone Star Funds as too low.

Cobham Chairman Shonnel Malani said his company will work with the U.K. government on binding commitments regarding Ultra’s contribution to national security, seeking to address one of the remaining hurdles to the transaction.

Britain conducted a review before signing off on the Advent deal after Cobham’s founding family accused it of letting go of a vital national asset.

Shares of Ultra, which said on July 23 that it was inclined to accept a Cobham offer representing a 42% premium to prior trading, rose as much as 8.2% and were priced 5.2% higher at 33.26 pounds of 9:29 a.m. in London.

Meggitt traded 0.3% lower at 816.40 pence after the company set a date of Sept. 21 for a shareholder vote on the sale to Ohio-based Parker-Hannifin. The U.K. Takeover Panel gave rival suitor TransDigm until Sept. 14 to announce a firm intention to make an offer.

Parker has bid 800 pence a share for the U.K. business, while TransDigm says it could offer 900 pence.

Meggitt Chairman Nigel Rudd said in a letter to investors that a takeover by Parker would de-risk the company amid uncertainty over the pace of a recovery in jetliner demand. He said the U.S. firm will be a “responsible steward” after guaranteeing to maintain manufacturing headcount.

Rudd has separately called on the U.K. to block any takeover by bidders who fail to offer binding commitments on investment and jobs, the Times newspaper reported, citing an interview. TransDigm has yet to provide such undertakings.

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