Ultra takeover comes under national security scrutiny

The UK government has launched a consultation into the proposed acquisition of Ultra Electronics by Cobham Ultra Acquisitions Limited, which is owned by US private equity firm Advent International.

The consultation, launched on 23 June on national security grounds, will last until 3 July but it is unlikely to change the outcome of the deal.

According to a statement from the Department for Business, Energy & Industrial Strategy and the Competition Markets Authority, the government ‘is minded to accept’ guarantees to address national security concerns following advice from the MoD.

Among the proposed undertakings from Advent, Ultra will be split into two UK legal entities over which the government will have ‘strong step-in rights’ to enable the transfer of ownership, either to itself or a third party, on national security grounds.

These step-in rights will resemble a ‘golden share’.

Additionally, Advent will be required to institute a government-approved plan to prevent International Traffic in Arms Regulations (ITAR) controls applying to ITAR-free products designed and manufactured by Ultra.

Cobham offered $3.57 billion to take over Ultra in July 2021, triggering concerns about the potential erosion of UK defence industrial sovereignty.

At the same time, the government is trying to balance its commitment to free-market economics with its pledge in its Defence Security and Industrial Strategy to prioritise the long-term development of a sovereign industrial base.