British engineering and defence giant Cobham has been snapped up by a group of US investors in a deal that values to business at £4 billion.
The takeover by private equity group Advent International Corporation will now have to be voted on by Cobham shareholders, who will receive 165p per share – a 34.4% premium to the share’s closing price on Wednesday evening.
Cobham, which makes parts for Airbus planes and defence contractors around the world, said its board has unanimously recommended shareholders accept the offer.
But the deal could face heavy scrutiny by politicians, with many fearful when a British defence business is bought by a foreign entity.
Last year’s £8 billion hostile takeover of another British manufacturer, GKN, by turnaround specialists Melrose was particularly controversial, with questions raised in Parliament and intense scrutiny over the deal.
Politicians and unions argued that the deal could hit the British manufacturing industry.
This year several car manufacturers have already said they plan to shut factories or reduce jobs and Cobham’s new owners may be asked to make assurances that the 10,000 employees are protected.
Cobham has struggled in recent years following an aggressive expansion which left it with a huge debt pile.
The integration of new divisions did not go smoothly, and profit warnings followed after its biggest contract with the US air force – a refuelling system – came into problems, leading to a £500 million cash call to investors.
Analysts welcomed the deal but warned more takeovers by private equity are highly likely whilst the pound is trading at two-year lows.
Neil Wilson, chief investment analyst at Markets.com, explained: “It’s the latest sign that more firms are happy to go private and take them out of the glare of public markets – Cobham’s had its troubles after a hot streak of profit warnings.
“It’s also a sign that weakness in sterling continues to make UK companies attractive to foreign buyers. The pound is at its weakest in two years and could bounce on a deal with the EU – carpe diem for foreign buyout specialists.”
Private equity firms have been buying up listed companies in record numbers versus low numbers of companies joining the stock market.
Cobham confirmed one shareholder – Artemis Investment Management, which has a 5.1% stake – will vote in favour of the deal.