Ministers under pressure to block private equity takeover of Ultra

Ministers are under pressure to block the private equity takeover of defence group Ultra Electronics. 

Former defence secretary Lord Heseltine has slammed the £2.6billion bid from US bidder Advent International, which is acting through Cobham – another British military supplier which it bought last year in a bitterly contested deal. 

Accusing the business secretary Kwasi Kwarteng of ‘abandoning industrial strategy’, the Tory grandee called for rigorous checks to be conducted before any deal is approved. Heseltine, a successful businessman who served under Margaret Thatcher and John Major, said: ‘I have said before that we should have a proper scrutiny process for the purpose of industrial strategy. 

Troubled waters: Ultra Electronics provides highly sensitive electrical engineering and software services to the military, including the Royal Navy

‘This is another example of the mindset that anything is up for sale in this country. No other country behaves in this way. 

‘The business secretary has abandoned Britain’s industrial strategy – I think there must be a full scrutiny process for any deal involving a key firm, as there is in the US.’ 

Ultra Electronics provides highly sensitive electrical engineering and software services to the military, including the Royal Navy. Its maritime systems are used to patrol British waters, hunt submarines and protect aircraft carriers. 

Advent, through Cobham, has tabled an offer of 3500p per share – and Ultra’s board has said it is ‘minded to recommend’ the bid to its shareholders. Ultra’s chairman Tony Rice and chief executive Simon Pryce stand to get about £700,000 and £770,000 respectively for shares they own. 

Heseltine noted that from next year, under the new National Security and Investment Act, bidders planning to buy a company which operates in any of 17 key sectors must notify the Government. Ministers will have improved powers to scrutinise, intervene in and even block a deal, in what the Government has hailed as ‘the biggest shake up of the UK’s national security regime for 20 years’. 

But the Act will only come into force next January, by which time Ultra’s fate may already be sealed. 

The Government has said it is ‘closely monitoring the transaction’, but that it was a ‘commercial matter for the firms involved’. 

Heseltine is the latest in a string of high-profile figures to criticise the Ultra deal. Sir Gerald Howarth, another former Tory defence minister, said the takeover went ‘to the heart of the UK’s defence capabilities’ and needed to face tough scrutiny from the Government. 

Advent had already ruffled feathers with its takeover of Cobham. Since completing the deal last January, it has rapidly dismantled the group with many of its businesses sold to overseas buyers, raising concerns that critical know-how will be leaving the UK. 

A spokesman for Cobham said: ‘We have offered assurances that appropriate national security undertakings will be offered to the UK Government.

This post first appeared on Dailymail.co.uk