18 Sep 19. The FT reported today that the British government has intervened in the £4bn takeover of Cobham, the aerospace and defence group, on national security grounds.
Andrea Leadsom, business secretary, said after considering advice from the defence secretary and others from across government, she had decided to issue a so-called “intervention notice on the grounds of national security”. “As part of the statutory process, the Competition and Markets Authority will now investigate and carry out a review on the national security implications of the transaction,” she said. The government’s goals, she added, are “to support private sector innovation whilst safeguarding the public interest”. The CMA has been asked to report to her by 29 October.
The move by the government comes just days after shareholders in the FTSE 250 group on Monday overwhelmingly backed the all-cash offer from private equity firm Advent International, with more than 93 per cent voting in favour on a turnout of 78.5 per cent. It comes after a campaign by the founding family of Cobham, which owns 1.5 per cent of the company, which said the takeover was against the “national interest”. Nadine Cobham, whose late husband Michael Cobham ran the company and was the son of the founder Alan Cobham, wrote to the government asking ministers to intercede. Cobham’s pioneering air-to-air refuelling technology is used on all western fast jets but it is also a key supplier of components for the F-35 fighter and to the US military’s electronic warfare and radar capability. Recommended Cobham PLC Cobham snapped up by US buyout group Advent in £4bn deal Concerns had also been raised by a number of MPs, as well as former executives of the company, at an apparent lack of scrutiny from the government.
UK government interventions on national security grounds are rare. New rules for takeovers were introduced in 2018 in response to concerns that sensitive technology was being snapped up by foreign buyers, particularly Chinese companies. More sweeping proposals put forward in a national security and investment white paper published last summer were widely criticised for being too broad and unpredictable. Advent said it is “committed to being a responsible steward of Cobham, encouraging its future growth and success”. It said it will “continue to engage constructively and cooperatively with the UK Government in this part of their review.” Cobham was unavailable for comment on Wednesday morning. Its board, led by chief executive David Lockwood, previously said it saw no grounds for national security concerns. Advent has been in talks with the government about providing legally-binding commitments on investing in research and development in the UK after the takeover.
BATTLESPACE Comment: This move mirrors the move made over GKN and Melrose and may mean that Advent has to give undertakings to keep the MoD business in the UK for at least 5 years. We would expect the takeover to be allowed with certain undertakings.