UK defence group Cobham launches £2.6bn bid for rival Ultra

Cobham, the private equity-backed UK aerospace and defence group, has launched a £2.6bn takeover bid for London-based engineering supplier Ultra Electronics.

The defence group, which was taken private by Advent International of the US last year, made a non-binding cash offer of £35 per share for its rival, Ultra said on Friday.

The bid, a 42 per cent premium on Ultra’s last closing price, prompted a 33 per cent increase to £32.94 in the company’s shares by mid-morning trading on Friday.

It entitles shareholders to an interim dividend of 16.2p per share to be paid in September and follows an offer of £28 per share tabled in June.

The board said the value of the bid meant it would be “minded to recommend” it to Ultra shareholders “subject to consideration and satisfactory resolution of other terms and arrangements”.

This included the “establishment of safeguards for the interests of Ultra’s stakeholder groups”.

The group added that “Cobham has indicated to the board that it is minded to offer the UK government appropriate undertakings in respect of national security”.

Cobham has until August 20 to formalise the bid.

The two groups are suppliers of components to the Eurofighter Typhoon aircraft and the F-35 fighter jets, which will be deployed on the Royal Navy’s two new aircraft carriers.

Cobham’s interest in Ultra follows a rush of deals struck by private equity groups to acquire some of the biggest names on the UK stock market.

Cobham was itself taken over by Advent early last year in a deal worth £4bn.

Advent subsequently sold large parts of the business, leaving Cobham — one of Britain’s most historic aerospace groups — without any UK manufacturing sites.

The break-up has drawn condemnation from the family of Cobham’s founder.

Nadine Cobham, whose late husband Michael Cobham ran the company and was the son of founder Alan Cobham, told the Financial Times this month that Advent had “largely dismantled the company and sold off the parts”.

Ultra this week announced that its order book for the six months to July 2 had hit a “record” £1.3bn off the back of deals with the US Army, while statutory pre-tax profit rose 55 per cent to £46.2m.

Chief executive Simon Pryce said the company’s “strong first half demonstrates the benefits of Ultra’s strategic repositioning as an agile player in growing markets”.