Why ministers MUST intervene in these defence deals before the UK’s sector is jeopardised by foreign buyers
- Private equity titan Advent International has swooped on Ultra in a £2.6bn deal while aerospace giant Parker-Hannifin has agreed to buy Meggitt for £6.3bn
- The bidders – both American – have made a swathe of pledges to protect jobs
- But critics fear these promises are not worth the paper they are written on
Ministers have been urged to intervene in the Ultra Electronics and Meggitt takeovers as a growing chorus of critics warn promises made by their foreign buyers will be worthless.
Amid fears over the hollowing out of Britain’s defence sector, private equity titan Advent International has swooped on Ultra in a £2.6bn deal while aerospace giant Parker-Hannifin has agreed to buy Meggitt for £6.3bn.
The bidders – both American – have made a swathe of pledges to protect jobs and investment to win over sceptics. But critics fear these promises are unenforceable and not worth the paper they are written on.
Ministers have been urged to intervene in the Ultra Electronics and Meggitt takeovers as a growing chorus of critics warn promises made by their foreign buyers will be worthless
There are also concerns that both deals pose a threat to national security given the sensitive roles Ultra and Meggitt play in Britain’s defence industry. They point out that Advent’s assurances when it took over Cobham, another British defence firm, in a £4bn deal last year were not enough to stop swathes of the company being sold off.
Lord Heseltine, who was a defence secretary under Margaret Thatcher, said: ‘In any other country, including the US, these takeovers would be scrutinised by Government.’
He added that he regarded it as ‘totally naïve’ that UK politicians think it ‘unacceptable’ to intervene.
‘And I’m a total sceptic about any assurances that are given. I know that companies cannot give the sort of cast-iron guarantees for the future that would be enough to persuade me.’
Ultra’s board of directors this week backed Advent’s offer of £35 per share. The company makes highly sensitive equipment for the Royal Navy – notably submarine-hunting sonobuoys that are dropped into the sea to detect enemy activity.
In any other country, including the US, these takeovers would be scrutinised by Government
Business Secretary Kwasi Kwarteng has been monitoring the Ultra and Meggitt deals since they were first announced, indicating that he might intervene. The promises offered up by Advent and Parker-Hannifin are an effort to soothe the fears of ministers and investors – potentially avoiding a Government intervention further down the line.
But Kwarteng is able to step in on national security grounds even if guarantees have been agreed, and can block a deal if necessary. Labour MP Darren Jones, chairman of Parliament’s business committee, has already written to Kwarteng to raise concerns about how strong any commitments will be.
Jones said: ‘I’m not entirely sure that ministers are able to secure commitments at the moment that are legally enforceable for the long-term in the interest of British workers or indeed British capabilities in the defence industry.’
Tory MP Tobias Ellwood, chairman of the defence committee, said: ‘The UK’s industrial strategy must not be to allow us to haemorrhage industrial assets which diminishes our military procurement abilities when we should be expanding them.’