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Ultra Electronics manufactures and supplies sonar systems for submarines, cryptography systems, flight systems that are used in missiles and detection systems. The company directly supplies the US Department of Defence (DoD), UK Ministry of Defence (MoD) and Australian DoD, with the US DoD and UK MoD accounting for 24% and 7% of the company’s 2020 revenue respectively. It is therefore unsurprising that on 18 August 2021, Business Secretary Kwasi Kwarteng the CMA to investigate the proposed takeover on national security grounds. Kwarteng also an Order (, a subscription to Lexis®PSL Corporate is required) in Parliament preventing Ultra Electronics from disclosing information to Cobham about the goods or services it provides to HM Government or HM Armed Forces. The CMA has until 18 January 2022 to submit its report. 

Cobham has agreed to offer a number of legally binding national security, social and economic commitments to the UK government. The commitments include the continuity of supply and critical capabilities in the UK, maintaining an appropriate board composition, protecting existing and creating new UK manufacturing and engineering roles, maintaining UK headquarters and increasing investment in innovation and research in the UK. These commitments are reminiscent of those given in Advent’s takeover of Cobham, which also covered a protection of jobs, maintenance of UK headquarters and a guaranteed level of R&D spend. However, despite those commitments, Advent was able to make a number of disposals within 18 months of its acquisition, selling Cobham’s , , , , and . Certainly, there will be concerns as to whether Ultra Electronics will be subject to the same asset-stripped fate as Cobham. 

Cobham’s bid for Ultra Electronics is not the only ongoing deal within the aerospace and defence sector, with TransDigm Group encroaching on Parker-Hannifin’s £6.3bn for Meggitt with a £7.03bn unsolicited (see: and ). Kwarteng is also reportedly monitoring the Meggitt transactions and it remains to be seen if the CMA will also intervene. The bids for Ultra Electronics and Meggitt may also be retrospectively called in under powers afforded by the (a subscription to Lexis®PSL Corporate is required). On 16 August 2021, the Panel that TransDigm would have until 14 September 2021 to make a firm offer for Meggitt or walk away from the transaction.

Market Tracker will continue to monitor these transactions as they develop. For examples of how companies are addressing the NS&I Act 2021 in takeover documentation, see Practice Note: (a subscription to Lexis®PSL Corporate is required).