U.K. to Review Advent’s Ultra Takeover on Security Grounds

(Bloomberg) -- The British government ordered a probe into the proposed purchase of defense-technology specialist Ultra Electronics Holdings Plc by U.S. buyout firm Advent International Corp., citing national security concerns.

Business Secretary Kwasi Kwarteng has issued a Public Interest Intervention Notice regarding the 2.57 billion-pound ($3.6 billion) agreed takeover by Advent’s Cobham Ltd. arm, according to a statement Wednesday. The Competition and Markets Authority has until Jan. 18 to prepare a report.

Ultra said Monday it had approved an all-cash acquisition by Advent, sparking an outcry among some politicians and unions, who say the U.K. firm’s role in producing sonars and electronics for Britain’s nuclear submarines make it a vital asset. Similar concerns surround bids for aerospace supplier Meggitt Plc by two other American groups, Parker-Hannifin Corp. and TransDigm Group Inc.

Kwarteng told Bloomberg in an interview this week that he planned to look closely at ongoing defense deals, including the Ultra transaction.

Referencing the decision to order the CMA probe, the minister said on Twitter that “the U.K. is open for business, however foreign investment must not threaten our national security.” In a later tweet he said he’d lodged an order in parliament preventing Ultra from disclosing sensitive information to Cobham on work it does for the British government and armed forces.

A spokesman for Ultra declined to comment on the U.K. move, while pointing to a statement earlier this week from Chairman Tony Rice saying the company’s board is “comfortable” that legally binding undertakings to the government will protect stakeholder interests.

Cobham also declined to comment, while reiterating that it will engage pro-actively with U.K. authorities.

Breakup Controversy

Britain conducted a similar review of Advent’s proposed Cobham purchase before signing off on the deal in December 2019, saying it was satisfied with remedies proposed to address security concerns.

The purchase went through in January last year and has remained controversial, with the private-equity buyer selling off divisions so that Cobham now has no U.K. manufacturing presence, leading its founding family to accuse the government of abandoning a national asset.

U.K. defense assets have become targets for foreign takeovers as private-equity firms tap into free-flowing capital and British stocks trade at a discount to U.S. and European peers. The National Security and Investment Act, which widens government powers to screen proposed deals and intervene on security grounds, is due to come into force in January.

Ultra shares closed little changed at 33.64 pounds in London prior to the government announcement, compared with the agreed purchase price with Advent of 35 pounds.

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