The government looks set to clear the £2.6 billion takeover of Ultra Electronics by private equity-owned Cobham after the parties agreed what insiders have called unprecedented security undertakings.
Kwasi Kwarteng, the business secretary, said last night that he was minded to accept the takeover, after a ten-month investigation into the national security implications that involved advice from the Ministry of Defence and GCHQ, the government’s communications headquarters.
Ultra supplies anti-submarine technology for warships and reconnaissance, patrol and spy aircraft. A lot of its work is not in the public domain. The takeover had raised concerns because Cobham, founded in 1934 by Sir Alan Cobham and one of the most famous names in the UK aerospace industry, is now owned by Advent International, an American private equity firm.
In a 74-page document setting out the undertakings, Cobham has agreed that Ultra’s most secretive operations will be put into two “SecureCos”, legal entities on which the government and its advisers will have representatives.
The government will also have what the document calls “strong step-in” rights, a sort of golden share that enables it to veto matters it feels are a threat to national security, and control over Ultra’s strategic direction.
Ministers can, if they feel it necessary, transfer Ultra’s intellectual property to other entities. These government rights over Ultra will exist in perpetuity, so cannot fall away after a few years. One source who has read the document said the undertakings were unprecedented for a UK company.
Shonnel Malani, chairman of Cobham, said the announcement “is a positive step for investment in Ultra and in the Five Eyes alliance. We have always been clear about our unwavering commitment to ensuring that the UK’s national security is protected and believe these very extensive and robust undertakings will do just that.” Ultra declined to comment.
The Department for Business, Energy and Industrial Strategy, said there would be a further short consultation, until midnight on July 3.
Advent completed a £4 billion deal to buy Cobham in January 2020, but there was a backlash from the Cobham family. On Sunday Lady Cobham, the founder’s daughter-in-law, repeated her concerns about the government “auctioning off” high-tech firms such as Ultra, Inmarsat and Meggitt, according to The Mail on Sunday. “The threat from Russia and China is growing and we should be investing in our domestic defence capability,” she said.
Ultra, which played a key role in the RAF’s supply chain during the Second World War, employs about 4,500 people, half of them in the UK. Cobham has about 10,000 employees around the world, and operations in North America, Europe, Australia and South Africa.
