British defence tech specialist Ultra Electronics has been bought for £2.6bn by a US private equity firm, through a wholly owned UK subsidiary that was itself once a proud standalone business.
Ultra’s acquisition by Cobham Group plc, owned by US fund Advent International, sees the defence firm’s shareholders receive £35 per share – as well as ownership of the critical Royal Navy supplier passing to a foreign entity, albeit one headquartered in an allied country.
Ultra chief exec Simon Pryce praised Cobham in a prepared statement, adding: “The combination will also create a defence electronics business of greater scale, bringing together two businesses with complementary technology, design, engineering and manufacturing capabilities, which we believe will enable the delivery of a broader range of integrated, cost competitive and high performance solutions across a wider range of platforms, benefiting our mutual customers and wider stakeholders.”
Strangely low profile despite its position in the defence electronics supply chain, Ultra supplies the Royal Navy with sonobuoys (underwater devices for detecting submarines), full-blown sonar systems for warships and submarines, and various other military electronics as well as aerospace equipment.
A British government spokesman told defence trade news site Shephard Media, when the buyout was first made public: “While this is a commercial matter for the companies involved, we are closely monitoring the transaction.”
Foreign mergers and acquisitions have come under increased scrutiny thanks to Chinese acquisitions of companies such as Newport Wafer Fab over the past few years. While the government has made some noises about protecting UK-owned intellectual property from exploitation by Chinese entities, headline-grabbing government powers allowing deals to be cancelled over national security concerns have not, in fact, been used to do so.
Cobham’s sale (and subsequent breakup by its new owners) provoked horror in the British establishment as the formerly family-owned firm, which pioneered technologies such as air-to-air refuelling, was scattered. That the remains of Cobham were used to buy up another successful British business hasn’t passed unnoticed; a Labour Party shadow minister questioned “the business model of the new owners, and future governance and operational freedoms.”
Another British defence supplier due to be bought out by the US is Meggitt, makers of aerospace components and subsystems, as well as military training systems and aids. While the government made noises about potentially intervening in that deal, no action has yet followed.
Much of the intellectual property in these defence businesses is similar to that in the tech industry and has substantial crossovers with it; modern warships increasingly use internal networking setups that would be very familiar to the average Register reader. Designing these technologies and integrating the vast volumes of data they generate is something in which the UK has, historically, been a world leader. Critics say seeing these companies bought by overseas entities and broken up for their IP assets doesn’t bode well for Britain’s industrial future. ®