UK’s Ultra can recommend Cobham’s $3.6 billion takeover offer to investors

July 23 (Reuters) – Defense group Cobham Ltd has made a $3.6 billion offer to buy UK-based rival Ultra Electronics (ULE.L), Ultra said on Friday, adding it is considering the shareholder offer to to recommend.

Shares in London-listed Ultra, whose main clients are the UK and US governments, rose a staggering 34% to a record high of £33.18 on the news, below Cobham’s offer price of £35 a share plus a dividend of 16.2 pence a year. part.

The bid, the latest in a wave of private equity stakes in UK companies driven by cheap valuations due to the pandemic and Brexit, is higher than a £28 per share offer made by Cobham in June.

Based in Dorset, England and founded in 1934, Cobham is known for its pioneering air-to-air tank technology. It was bought last year by Boston-based private equity firm Advent International, and its US ownership could mean the deal raises national security concerns in Britain.

Both companies have respective technologies used in the US F-35 and Eurofighter Typhoon jets.

Ultra, which had rejected Cobham’s June offer, said it was considering recommending the latest proposal to shareholders subject to agreement on various terms, while Cobham said in an emailed statement it welcomed that announcement.

A purchase of Ultra would help Cobham tap into the maritime defense market, where Ultra sells sensors, torpedo and radar systems, primarily to Western customers. The company also makes a range of defense communications equipment and forensic software.

Cobham, which makes devices used in electronic warfare and missiles, said it has “provided assurances that the UK government will provide appropriate national security guarantees”, without elaborating further.

While national security concerns could arise, there are already other US-owned British defense companies, Peel Hunt analyst Henry Carver said.

“I don’t think that will be a sticking point,” said Carver, pointing to the strong defense relationship between the two countries. “This is an offer shareholders cannot ignore… we think it is likely that a deal will be struck,” he said.

Cobham said in June it hoped to create a “global champion in defense electronics” by buying Ultra, as they offer complementary offerings to the United States, the UK and other defense allies.

JP Morgan Cazenove is Ultra’s financial advisor on the offer.

Reporting by Yadarisa Shabong in Bengaluru; Editing by Arun Koyyur, Shailesh Kuber and Susan Fenton

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