The United Kingdom on Wednesday, September 18 launched a national security investigation into a £4-billion takeover bid for British defense group Cobham by a U.S. private equity firm.
Advent International in July offered the equivalent of $5 billion or €4.5 billion for Cobham, aided by the beneficial impact of the Brexit-hit weak pound.
Shareholders at the British company approved the deal on Monday despite vocal opposition from the founding Cobham family.
Dorset-based Cobham is known for pioneering technology enabling the mid-air refuelling of planes. Among a wide range of other products, the firm also makes counter-IED systems, electronic warfare systems and communications systems for military vehicles.
The U.K. Secretary of State for Business, Energy and Industrial Strategy has the power to intervene in mergers on public interest grounds relating to national security.
“Following careful consideration of the proposed takeover of Cobham, I have issued an intervention notice on the grounds of national security,” Business Secretary Andrea Leadsom said in a statement.
She added that the Competition and Markets Authority would investigate the “national security implications of the transaction” and provide its findings by October 29.
“The government’s goals are to support private sector innovation whilst safeguarding the public interest,” Leadsom said.
In late morning deals, Cobham shares slid 0.5% to 159.65 pence on London’s second-tier FTSE 250 index, which was up 0.2% at 20,081.95 points.
“A muted share price reaction … suggests, rightly or wrongly, that the market expects the deal to go through,” said Russ Mould, investment director at broker AJ Bell.
“While there may have been an element of opportunism to Advent’s approach, it is certainly not the first overseas firm to take advantage of sterling weakness to acquire U.K. assets at a discount,” he said.
With reporting from AFP
