The British government has intervened in the US buyout of defence supplier Ultra Electronics, temporarily halting the acquisition and prohibiting any tech transfer overseas.
An order in Parliament was laid yesterday (PDF) that prohibits Ultra’s buyer, Advent International, from receiving any of its intellectual property until further notice.
The business is a major supplier of high-end electronics to the Royal Navy and the other British armed forces. Among other items it supplies sonar systems for nuclear submarines, as well as aerospace components and subsystems.
The £2.6bn acquisition of Ultra was carried out through Cobham plc, formerly a standalone British business itself until its own acquisition by Advent a couple of years ago.
Business Secretary Kwasi Kwarteng’s temporary pause on the Ultra buyout surprised some commentators who believed that any government interest in halting mergers and acquisitions would be mainly focused on high-profile Chinese deals, such as Newport Wafer Fab.
This afternoon, I instructed the @CMAgovUK to investigate the proposed acquisition of Ultra Electronics by Cobham to assess any national security concerns
The UK is open for business, however foreign investment must not threaten our national security
— Kwasi Kwarteng (@KwasiKwarteng) August 18, 2021
Competition regulators will now scrutinise the Ultra buyout. Their remit does not formally include national security concerns, though many commentators assume that is an unspoken concern behind the order in Parliament.
Trade unions welcomed the order, with Steve Turner, assistant general secretary of the Unite union, telling The Guardian newspaper: “This is an issue of national security and it is to be hoped that the government has finally woken up to the threat to the UK’s sovereign defence capability, as well as to skills and jobs, posed by venture capitalists who are primarily motivated by short-term profits.”
In an opinion article, BBC News business editor Simon Jack wailed: “Whatever you think, UK PLC seems to be on sale.”
He added: “To be honest, it would have been pretty odd if the government had not wanted to kick the tyres of a foreign swoop on a UK company that makes very sensitive stuff for jet fighters, submarines and nuclear missiles.”
The Competition and Markets Authority (CMA) has opened a public comment period on the Ultra buyout. That period ends on 10 September. The CMA will report its full concerns to the government by January next year. ®