U.K. Sonar Specialist Ultra Warms to Cobham’s Takeover Bid
(Bloomberg) -- Ultra Electronics Holdings Plc received a 2.58 billion-pound ($3.55 billion) buyout approach from Cobham Ltd. and said it’s inclined to accept the bid to unite the two British manufacturers of defense and aerospace electronics.
The shares jumped the most on record after Ultra said Friday that Cobham, owned by U.S. private-equity firm Advent International Corp., made a non-binding offer of 35 pounds per share. The offer is 42% higher than Ultra’s closing price on Thursday.
Ultra said its board is minded to recommend the offer to shareholders, after receiving assurances that Cobham is prepared to offer the U.K. government “appropriate undertakings in respect of national security.”
The approach is the latest bid to acquire U.K. aerospace and defense assets as private equity takes advantage of free-flowing capital to step up acquisitions. Cobham was acquired by Boston-based Advent in January 2020, and firms including Senior Plc and Meggitt Plc have been approached by buyout firms since.
Shares in London-based Ultra advanced 32% to 32.70 pounds at the close in London.
A spokesman for Cobham said it welcomes Ultra’s response and “continues to see strong industrial logic to the combination.”
Ultra’s business activities include providing sonar for submarines, nuclear controls and maintaining a store of sensitive components for the nuclear deterrent. The U.K. government, which did a national security review before signing off on the Cobham-Advent deal, would also have to wave through an Ultra sale.
“The environment has changed” since the Cobham sale, said Agency Partners analyst Nick Cunningham. “Assets which have a direct connection with national security have come to be valued a bit more.”
The experience of the coronavirus pandemic has highlighted the value of national infrastructure and means that the U.K. government may now see such assets differently, Cunningham said, while the national security environment has also deteriorated over the past year.
The Cobham sale to Advent was controversial, with the founder’s family accusing the government of letting a vital national asset be sold off in a takeover that other countries would have blocked.
Talks between Cobham and Ultra became public in June, when Cobham announced that a number of structures were under consideration. Ultra said at the time that the discussions revolved around a combination of one of its units.
An initial offer for the business from Cobham was made at 28 pounds per share on June 29, Ultra said on Friday. The latest proposal, together with an interim dividend that Ultra shareholders would be entitled to, is equivalent to a value of around 2.58 billion pounds, it said.
The deadline for a final offer has been extended to Aug. 20.
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