Private equity swoops on British defence giant Ultra Electronics

Ultra Electronics could become the latest British firm to fall into private equity hands after it was targeted in a £2.6billion takeover swoop. 

The defence group’s board said it was minded to back the offer of 3500p per share from US buyout firm Advent. 

The approach by Advent came through Cobham, another UK defence firm it bought last year in a bitterly-contested deal. 

Swoop: Ultra’s ‘sonobuoys’ can be dropped from Merlin helicopters (pictured) and Poseidon planes to help detect objects in the ocean

Under the proposal, Ultra chairman Tony Rice and chief executive Simon Pryce stand to get about £700,000 and £770,000 respectively for shares they own. 

However, any deal is likely to trigger an official review due to the highly-sensitive technology Ultra supplies to the armed forces, particularly the Royal Navy. 

Also a key supplier to the US armed forces, the firm’s pioneering maritime systems are used by the Navy to patrol British waters, hunt submarines and protect aircraft carriers, among scores of other things. 

In a bid to ensure the deal goes through, Advent has said it is prepared to make national security undertakings. 

But the firm’s ruthless dismantling of Cobham after buying the company just 18 months ago is likely to trigger fear for jobs at Ultra and Britain’s defence supply chain, should the sale be approved. The swoop on Ultra comes as private equity groups scour the UK for deals with supermarket chains Asda and Morrisons and security firm G4S among those targeted. 

Sir Gerald Howarth, a former Tory defence minister, said the takeover went ‘to the heart of the UK’s defence capabilities’ and needed to face tough scrutiny from the Government.

He said: ‘This is a company that is critical to the Royal Navy and to the protection of our aircraft carriers. When it comes to the defence of the realm, we simply cannot have a free-for-all where City financiers are pouncing on critical businesses, breaking them up and then flogging them to the highest bidder. 

‘So ministers absolutely must step in. Given everything that has happened at Cobham, we have got to be very tough.’ 

Admiral Lord West, the former head of the Royal Navy, also warned of ‘giving up on the UK having sovereign capability in areas that are important to the security of the nation’. ‘Ultra makes some really important stuff, technology at the cutting edge that allows us to beat our opponents,’ he told the Telegraph. ‘It’s extremely troubling that the Government talks about us having sovereign capability – whether it’s defence or areas such us the ability to make medicines in times of emergency – but yet again it looks like ownership that will go to the Americans.’ 

Following its latest approach, Cobham has until August 20 to make a formal offer for Ultra under ‘put up or shut up’ rules. 

Shares in Ultra surged 32.4 per cent, or 800p, to a record 3270p. 

Advent says it wants to merge Ultra and Cobham, which makes devices used in electronic warfare and missiles, to create a ‘global defence electronics champion’. 

Responding to the 3500p a share offer, Ultra said that after considering the proposal ‘the board has indicated to Cobham that it is at a value the board would be minded to recommend to Ultra shareholders, subject to consideration and satisfactory resolution of other terms and arrangements’. 

The Ultra spokesman said Cobham ‘has indicated that it is minded to offer the UK government appropriate undertakings in respect of national security’. 

Howard Wheeldon, an independent defence analyst, said it was likely that a review by the UK and other governments would have to be carried out before the deal could go ahead. 

A Cobham spokesman said: ‘Cobham welcomes the announcement from the board of Ultra Electronics. We have offered assurances that appropriate national security undertakings will be offered to the UK Government.’

World leader 

Ultra Electronics is world leader in sonar, radar and torpedo technologies which are widely used by western countries in the Five Eyes intelligence-sharing partnership. 

Set up in 1920, the company’s sonar systems are used on a plethora of ships and aircraft to hunt submarines and patrol British waters. 

Ultra’s ‘sonobuoys’ can be dropped from Merlin helicopters and Poseidon planes to help detect objects in the ocean. 

And the business’s pioneering maritime systems are used aboard the Royal Navy’s Type 23 frigates, Type 45 destroyers and the Queen Elizabeth class aircraft carriers. 

‘Step up and protect the industry’

Lady Cobham last night called on the Government to step up and protect what’s left of Britain’s manufacturing base. 

Plea: Lady Cobham

Plea: Lady Cobham

Cobham, the company set up in 1934 by her father-in-law, the celebrated aviator Sir Alan Cobham, was bought by Advent last year. 

The deal was opposed by Lady Cobham who warned the takeover would result in the break up of the company and the loss of key technologies to foreign owners. 

Her grim prediction has since come to pass. 

Advent has broken Cobham into nine pieces and sold many of them off, including the once-prized air-to-air refuelling business. 

Last night Lady Cobham said: ‘Advent carved up Cobham and sold most of it off, despite undertakings to government that it would invest in the company and protect jobs. Now is the time for the Government to step up and protect what’s left of our defence manufacturing base.’ 

Advent insists Cobham has ‘performed strongly’ under its ownership and that it has invested more than £250m in research and development.