(Bloomberg) — The U.K. government is moving closer to approving the 2.57 billion-pound ($3.4 billion) takeover of defense firm Ultra Electronics Holdings Plc by Cobham Ltd., more than seven months after ordering a probe into the deal, according to people familiar with the matter.
Cobham has agreed to a set of improved commitments to gain political backing for the transaction that include granting the U.K. oversight of contracts, future asset sales and business relationships, the people said.
It’s also agreed to set up a supervisory board with state representation to oversee specific contracts, one of the people said, asking not to be identified because the information is confidential.
Cobham is owned by the private equity firm Advent International Corp. As part of its discussions with the U.K. government, Cobham agreed that Ultra will remain a standalone business within the group, the person said.
Plans for the separate board were reported Monday by the Daily Mail, which cited an unidentified person.
Russia-Ukraine Delay
Ultra, which makes highly-sensitive defense equipment for Britain’s nuclear submarines, agreed to the Cobham takeover in August. Just days later, U.K. Business Secretary Kwasi Kwarteng issued a Public Interest Intervention Notice, citing national security concerns.
Ultra had targeted completion of the sale by the end of this month, a goal it repeated after Kwarteng’s probe was announced. The company said Wednesday as it reported earnings that it won’t make that deadline but remains committed to a successful closing of the transaction.
While the U.K.’s Competition and Markets Authority reported findings back to the government in mid January, final approval of the deal has been delayed in part by Russia’s invasion of Ukraine, the people said.
No Final Decision
Though approval appears more likely, no final decision has been made and the outcome could still change, the people said. Representatives for Cobham and Ultra declined to comment on the talks with the government.
“The government remains in consultation with the parties involved in the merger and will take account of all relevant considerations when deciding whether to refer this matter to the CMA for further assessment,” the U.K.’s Department for Business, Energy and Industrial Strategy said.
The U.K. government has been under pressure to more closely scrutinize takeovers of the country’s vital defense assets. The planned takeover of aerospace and defense firm Meggitt Plc by U.S.-based Parker-Hannifin Corp. also triggered a security probe last year, while Cobham’s own takeover by Advent was criticized for not having enough oversight.
Parker-Hannifin last year said it would engage with the government on legally binding commitments, after promising to keep a majority of the Coventry, England-based company’s board British and to maintain technology and manufacturing in the U.K.
(Updates with Ultra comments from earnings in seventh paragraph.)
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