Kwarteng talks tough on UK defence as he launches a probe into Advent International’s pounce on Ultra Electronics
- In the first major intervention since he became Business Secretary, he has ordered regulators to study the proposed £2.6bn tie-up
- He also banned Ultra from sharing sensitive details about its work with the Government
- Kwarteng said: ‘The UK is open for business, however foreign investment must not threaten our national security’
Kwasi Kwarteng signalled a tough new approach to the takeover of strategic British firms after he launched an investigation into Advent International’s pounce on Ultra Electronics.
In the first major intervention since he became Business Secretary, he has ordered regulators to study the proposed £2.6bn tie-up.
He also banned Ultra from sharing sensitive details about its work with the Government and armed forces with American private equity giant Advent. Kwarteng said: ‘The UK is open for business, however foreign investment must not threaten our national security.’
Kwasi Kwarteng signalled a tough new approach to the takeover of strategic British firms after he launched an investigation into Advent International’s pounce on Ultra Electronics
It marked a striking change in tone for the Government after a string of controversial deals have been waved through with little to no scrutiny over the past few years. And it is far earlier than a similar intervention to review the Cobham takeover two years ago – also by Advent.
Kwarteng’s move is a victory for the Mail and campaigners who have repeatedly called for ministers to protect Britain’s world-class defence firms. But it will be a blow for Shonnel Malani, who is spearheading Advent’s takeover of Ultra and who oversaw the buyout of Cobham last year. Ultra is a critical supplier to the UK’s armed forces.
Founded in 1920, it has 1,700 people in the UK and 4,500 worldwide. Its work includes making parts for Typhoon jets, forensics equipment and submarine-hunting sonobuoys. Advent swooped with a £35 per share ministers must intervene in defence deals not worth the paper they are written on Ultra electronics must not be sold bid in July, and Ultra’s board backed the offer on Monday.
The offer is around two-thirds higher than Ultra’s share price before the approach. Although it has sign-off from the top team, Advent’s move has already attracted criticism from the likes of Tory grandee Lord Heseltine, former head of the Royal Navy Admiral Lord West and defence committee chairman Tobias Ellwood MP. They have all said the Government should intervene and potentially block the deal.
£7billion bidding war for Meggitt
The fight for Meggitt is set to turn into a full scale bidding war after a second American suitor said its interest in the British firm is ‘serious’. Transdigm gave its strongest hint yet of a formal offer just a week after approaching Meggitt about a takeover. Kevin Stein, chief executive at the US engineer, told the FT: ‘We don’t do things of a frivolous nature. We are serious about aerospace and about turning good businesses into great ones.’
Transdigm is expected to make a formal offer of 900p a share, valuing Meggitt at £7bn. That would ruffle the feathers of US rival Parker-Hannifin which has agreed a deal with Meggitt’s board which is worth 800p a share. Coventry-based Meggitt has 9,000 staff, with more than 2,000 of them in the UK, and makes parts for planes and military aircraft. Transdigm has until September 14 to make a formal bid or walk away. Meggitt shares
The City has been sceptical of Advent’s latest advance after it broke up and sold off much of Cobham within the first 18 months of its £4bn deal completing – despite promising to be a long-term investor. Independent defence analyst Francis Tusa said he was pleased to see the probe.
Tusa said: ‘This is absolutely brilliant. If Ultra isn’t strategic and worthy of an intervention, then what is? In no other country would this be given the go-ahead. We’re open for business, but only on the right terms.’
Kwarteng has the power to intervene in takeovers in sensitive industries that could put Britain’s security under threat, and can even stop them. Regulators at the Competition and Markets Authority will study the Advent-Ultra deal and assess whether it would pose any national security risks. Kwarteng will then make a final decision.
If the deal goes through, there are likely to be a series of promises made by Ultra to protect jobs and research. But these are tricky to enforce and the experience with Cobham has proven to many that the pledges are virtually worthless. Defence firm shares will be in the spotlight today in the wake of the intervention.
Russ Mould, investment director at AJ Bell, said: ‘The intervention could conceivably give investors pause for thought on Meggitt and Senior, particularly Meggitt given that there is a live bid and another potentially in the wings.’
American group Parker-Hannifin has agreed a £6.3bn deal with Meggitt, but US firm Transdigm has indicated that it might put forward a £7bn bid. And Senior, another FTSE 250 aerospace group, is still thought to be a takeover target, despite recently turning down five offers from private equity group Lone Star.