Experts pour scorn on the pledge to protect British workers in defence takeovers 

The American suitors of Ultra Electronics and Meggitt have made sweeping promises to protect jobs and invest in research in an attempt to convince ministers to support the deals. 

Private equity giant Advent International pledged to create apprenticeships, keep a UK headquarters and fund academic institutions as Ultra’s board agreed to a £2.6bn takeover. 

Meggitt bidder Parker-Hannifin has offered similar assurances far earlier than would usually be the case during a takeover offer, as it tries to seal a £6.3bn deal. 

The American suitors of Ultra Electronics and Meggitt have made sweeping promises to protect jobs and invest in research in an attempt to convince ministers to support the deals

Both moves followed concerns – highlighted by this newspaper – raised by a string of politicians and military figures about the latest selloffs of strategically important aerospace and defence firms. 

The signalled commitments – which both groups say they want to make legally binding – are an effort to assuage these fears. But critics still believe the guarantees would not be worth the paper they are written on. 

The scepticism has been fuelled partly by the £4bn takeover of Cobham last year by Advent – which saw the company dismantled and multiple businesses sold despite assurances – and other disastrous deals including the purchase of Cadbury by Mondelez and the acquisition of Arm by Softbank. 

Admiral Lord West, former head of the Royal Navy, said: ‘The behaviour by Advent after its takeover of Cobham last year was predicted by many and should act as a warning of the threat to UK high-tech defence firms from foreign takeover. Advent promised to be a long-term investor but sold the majority of the company within 18 months.’ 

Leading independent defence analyst Francis Tusa said: ‘If the experience of assurances over Cobham are anything to go by, any assurances would be equally worthless. When you sell to private equity you do not know, and cannot control, where some bits of Ultra are going to end up.’ 

Business Secretary Kwasi Kwarteng has said he is closely monitoring both deals, and even if a number of commitments are agreed, he could still launch a formal intervention to weigh up whether they pose a threat to national security. 

Ohio-based Parker-Hannifin has said Meggitt – to which it is already a supplier – would be the perfect partner to expand its presence in the UK. It has offered to pay 800p per share for Meggitt. However, it could face competition from Transdigm, another Ohio-based aerospace firm, which is considering buying Meggitt for 900p per share and has until September 14 to decide if it will make a firm offer. 

Parker-Hannifin and Advent have offered guarantees without prompting – but at the moment they are only commitments to agree to guarantees. This means both companies will engage with the Government and other groups to discuss the potential promises, but nothing at all is pinned down and the proposals could change dramatically. 

The discussions could still be ongoing by the time shareholders vote on each offer, which is likely to be in the next couple of months. This means they would need to vote on faith rather than any certainties. 

Lord West suggests the Government should extend the ‘golden share’ held in BAE Systems and Rolls-Royce – which allows ministers to block takeovers – to other firms. He added: ‘Ministers must take resolute action to protect our high-tech defence base.’ 

This post first appeared on Dailymail.co.uk