Advent's $5 Billion Cobham Deal Opposed by Largest Shareholder

(Bloomberg) -- Cobham Plc’s largest shareholder is opposing a deal in which the U.K. defense and aerospace company agreed to sell itself to U.S. buyout firm Advent International Corp. for about 4 billion pounds ($5 billion).

Cobham could fetch a higher price after having repaired its balance sheet and made a “broad-ranging improvement” that will pay off over the next few years, Silchester International Investors LLP, which owns about 12%, said by email. The weak U.K. currency as well as Cobham’s U.S. operations make it a compelling target for a buyer “with significant North American interests,” the London-based fund said.

Under the deal, shareholders would receive 165 pence a share in cash, a 34% premium to the closing price on Wednesday, Cobham and Advent said Thursday. The stock traded 35% higher at 165.15 pence at the close in London.

Their deal came as cash-flush private-equity firms are seeking targets in Britain. June was the busiest month for private-equity purchases of publicly traded U.K. companies in more than a decade, with $9.8 billion of announced deals, according to data compiled by Bloomberg.

Silchester is reaching out to other shareholders to discuss the agreement. Ameriprise Financial Inc. is the second-largest shareholder, with only a slightly smaller percentage than Silchester. Causeway Capital Management LLC is the third-largest holder, with 8.7% of shares.

Regulatory Scrutiny

“There may be regulatory and political scrutiny of this deal,” Neil Wilson, an analyst at Markets.com, said of the Cobham transaction before Silchester announced its opposition.

Cobham traces its roots to 1934 and has about 11,500 employees globally, makes in-flight refueling systems, communications gear and specialized equipment for aircraft and ships. Customers include Airbus SA, Boeing Co., Lockheed Martin Corp. and A.P. Moller-Maersk A/S.

Before Thursday, Cobham’s shares were about half their highs of February 2015, even after gaining 26% this year. The transaction values Cobham at about 2.1 times trailing 12 months sales, according to data compiled by Bloomberg.

Cobham said first-half revenue increased 11% on an organic basis, and the company kept its outlook for the full year unchanged. It announced an interim dividend of 0.4 pence a share, adding that if the payout record date occurs before the effective date, the acquisition price would be reduced by the amount of the payment.

The Dorset-based company also began a strategic review of its Australian aviation services business, which has more than 1,300 staff and operates over 50 aircraft for clients including Qantas Airways, the Australian Border Force and Chevron Corp.

--With assistance from Lisa Pham, Tom Lavell, Tony Robinson and Thomas Black.

To contact the reporter on this story: Frank Connelly in Paris at fconnelly@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net, Tara Patel, John Bowker

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