UK to review Advent's Ultra takeover on security grounds

[LONDON] The British government ordered a probe into the proposed purchase of defence-technology specialist Ultra Electronics Holdings by US buyout firm Advent International Corp, citing national security concerns.

Business Secretary Kwasi Kwarteng issued a Public Interest Intervention Notice regarding the £2.57 billion (S$4.8 billion) agreed takeover by Advent's Cobham arm, according to a statement on Wednesday.

The Competition and Markets Authority (CMA) has until Jan 18 to conduct its examination. While that means it could report after a law introducing tougher powers to scrutinise deals comes into force, the government said on Thursday that the Ultra case will be determined according to existing legislation.

Ultra said on Monday it had approved an all-cash acquisition by Advent, sparking an outcry among some politicians and unions, who say the UK 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 by two other American groups, Parker-Hannifin Corp and TransDigm Group Inc.

Paul Everitt, ex-head of UK defence and aerospace trade body ADS, told BBC radio the government was right to step in and must now set "precedents and markers" for future bids. He questioned whether a private-equity owner with a "buy, break and sell" model is ever appropriate for a crucial defence business.

The Unite union said the intervention was a step in the right direction but that the government "must not just talk tough" and should now block both the Ultra and Meggitt sales.

Shares of Ultra were priced 1.6 per cent lower at £33.12 as at 12.53pm in London on Thursday in their first trading since the announcement. The stock was already below the £35 purchase price agreed with Advent after Mr Kwarteng told Bloomberg earlier this week that he planned to look more closely at ongoing defense deals.

Referencing the decision to order the CMA probe, the minister said on Twitter that "the UK is open for business, however foreign investment must not threaten our national security". In a later tweet he said he had 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 UK 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 UK authorities.

BLOOMBERG