Britain is to investigate the national security implications of the purchase of defense company Cobham PLC by US private equity firm Advent International Corp, potentially delaying or even blocking the US$5 billion deal.
British Secretary of State for Business, Energy and Industrial Strategy Andrea Leadsom’s move yesterday is not unusual where there are potential security concerns and follows British government intervention in the pending acquisition of satellite group Inmarsat PLC by an international private equity consortium that includes US firm Warburg Pincus LLC.
Leadsom has issued a European intervention notice, calling for a report from the British Competition and Markets Authority (CMA) by Oct. 29 to determine whether Cobham, the maker of air-to-air refueling equipment, should be sold.
The CMA could decide to undertake a lengthy inquiry due to Cobham’s role in supporting aircraft such as the F-35 Joint Strike Fighter and Eurofighter Typhoon, as well as advanced naval vessels, satellites and military vehicles.
Other deals investigated on national security grounds have often been cleared after undertakings from the buyer.
“The CMA will now prepare a report on the national security aspects of the proposed transaction,” the British Department for Business, Energy and Industrial Strategy said. “This is a statutory process to ensure national security implications of a proposed sale are fully assessed.”
Cobham, launched in the 1930s by a British adventurer and explorer, employs 10,000 people. It has struggled in the past several years, issuing a string of profit warnings in 2016 and 2017.
Advent has a track record of buying British technology companies, having snapped up electronics company Laird PLC for US$1.65 billion last year.
Cobham investors approved the takeover on Monday.
Some Cobham operations, such as its Advanced Electronic Solutions unit, have special security agreement status that allows them to bid for US defense contracts.
Cobham CEO David Lockwood on Monday said that requirement would disappear under Advent ownership, enabling the group to combine infrastructure and share knowledge more quickly and easily within the company.
Lockwood said that he had already held some discussions with government officials about the takeover, but would not go into details.
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