British defence supplier Ultra Electronics to be sold for £2.6bn to US-controlled firm
- Reference: 1629203109
- News link: https://www.theregister.co.uk/2021/08/17/ultra_electronics_sold_2_6_bn/
- Source link:
Ultra's acquisition by Cobham Group plc, owned by US fund Advent International, sees the defence firm's shareholders receive £35 per share – as well as ownership of the critical Royal Navy supplier passing to a foreign entity, albeit one headquartered in an allied country.
Ultra chief exec Simon Pryce praised Cobham in a prepared statement, adding: "The combination will also create a defence electronics business of greater scale, bringing together two businesses with complementary technology, design, engineering and manufacturing capabilities, which we believe will enable the delivery of a broader range of integrated, cost competitive and high performance solutions across a wider range of platforms, benefiting our mutual customers and wider stakeholders."
[1]
Strangely low profile despite its position in the defence electronics supply chain, Ultra supplies the Royal Navy with sonobuoys (underwater devices for detecting submarines), full-blown sonar systems for warships and submarines, and various other military electronics as well as aerospace equipment.
[2]
[3]
A British government spokesman told defence trade news site Shephard Media, when the buyout was first made public: "While this is a commercial matter for the companies involved, we are closely monitoring the transaction."
Foreign mergers and acquisitions have come under increased scrutiny [4]thanks to Chinese acquisitions of companies such as Newport Wafer Fab over the past few years. While the government has made some noises about protecting UK-owned intellectual property from exploitation by Chinese entities, [5]headline-grabbing government powers allowing deals to be cancelled over national security concerns have not, in fact, been used to do so.
[6]UK's Newport Wafer Fab now under Chinese ownership
[7]UKRI denies pulling funding from Newport Wafer Fab over Chinese ownership concerns
[8]Prime Minister says national security advisor will probe Chinese acquisition of UK's top chip maker
[9]Arm chief hits out at 'ill-informed speculation' over proposed Nvidia buyout
Cobham's sale ( [10]and subsequent breakup by its new owners) provoked horror in the British establishment as the formerly family-owned firm, which pioneered technologies such as air-to-air refuelling, was scattered. That the remains of Cobham were used to buy up another successful British business hasn't passed unnoticed; a Labour Party shadow minister [11]questioned "the business model of the new owners, and future governance and operational freedoms."
Another British defence supplier due to be bought out by the US is Meggitt, makers of aerospace components and subsystems, as well as military training systems and aids. While the government [12]made noises about potentially intervening in that deal , no action has yet followed.
[13]
Much of the intellectual property in these defence businesses is similar to that in the tech industry and has substantial crossovers with it; modern warships increasingly use internal networking setups that would be very familiar to the average Register reader. Designing these technologies and integrating the vast volumes of data they generate is something in which the UK has, historically, been a world leader. Critics say seeing these companies bought by overseas entities and broken up for their IP assets doesn't bode well for Britain's industrial future. ®
Get our [14]Tech Resources
[1] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YRvdOZCeJW0mXzoPBVHdfAAAAE4&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YRvdOZCeJW0mXzoPBVHdfAAAAE4&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YRvdOZCeJW0mXzoPBVHdfAAAAE4&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[4] https://www.theregister.com/2021/08/17/newport_wafer_fab_sold_to_wingtech/
[5] https://www.theregister.com/2021/07/07/uk_newport_wafer_fab_probe/
[6] https://www.theregister.com/2021/08/17/newport_wafer_fab_sold_to_wingtech/
[7] https://www.theregister.com/2021/07/23/ukri_denies_newport_wafer_fab_fund_issue/
[8] https://www.theregister.com/2021/07/07/uk_newport_wafer_fab_probe/
[9] https://www.theregister.com/2021/07/05/arm_chief_nvidia_buyout/
[10] https://www.thetimes.co.uk/article/cobham-mission-systems-sold-off-by-private-equity-owner-mwhk5nckz
[11] https://www.theguardian.com/business/2021/aug/16/ultra-electronics-agrees-takeover-by-rival-defence-firm-cobham
[12] https://www.bbc.co.uk/news/business-58054184
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YRvdOZCeJW0mXzoPBVHdfAAAAE4&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[14] https://whitepapers.theregister.com/
doesn't bode well for Britain's industrial future
That disappeared decades ago
Re: doesn't bode well for Britain's industrial future
Marconi, Racal, GEC, Plessey, Dowty, Ferranti, Lucas, Decca ....all gone.
Re: doesn't bode well for Britain's industrial future
Don't forget ARM
Re: doesn't bode well for Britain's industrial future
Marconi, Racal, GEC, Plessey, Dowty, Ferranti, Lucas, Decca ....all gone.
Well Marconi and Plessey were both bought out by the darling of the conservative government, GEC, who then decided to get rid of their cash cow defense business to BAe and go into the exciting world of telecoms, only to find that in a world bereft of national protectionism (which basically defence is), they could not compete. I worked for GEC - there was not much worth saving
Ferranti decided to get into bed with a international arms dealer who then bled them dry (Good technology company, terrible management)
Lucas are still used as a byword in some parts of the world for terrible electronic products.
Ironically Ultra electronics ironically is the rump of Dowty
To be truth none of these companies could be considered world leading, and probably rely to much on defence markets therefore rely on the public purse teat, rather than being progressive and international aggressive. T
Re: doesn't bode well for Britain's industrial future
For those that are worried, have a look at all the defense contractors scooped up by BAE, ya know, British Aerospace Electronics, here in the United States.
If you are so concerned, get together with a few million of your closest friends and pitch in 1,000 pounds each to buy it yourself. I would think that 10,000,000,000 - 30,000,000,000 pounds should make a nice purchase with plenty of capital left over for improvements and expansion.
Otherwise: Talk to the hand 'cause the face ain't list'en!
I feel the need to re-iterate, the great british sell-off continues apace.
Selling England By The Pound
I was going to use that, but I felt that being in my late 30's I was too young to use a genesis lyric
> headline-grabbing government powers allowing deals to be cancelled over national security concerns have not, in fact, been used to do so.
Not least because they don't come into force until 2022.
You gotta pay for it
If British firms were interested, they could have bid for Ultra. But they were not.
The government could confiscate it (i.e. nationalise without paying). Or they could legitimately nationalise it. But the Treasury is not interested.
Is this government and establishment worth defending? Some people will have doubts.
Warfare is, after all, only a commercial matter - nothing to see here, move along there!
Sustainable War™®
Sustainable War™®
Well now lets see, there's lots of stuff that is Green in the military, so yeah, there's that - right?
Market concentration in the defence industry
A central issue that people never bother to consider when commenting on this type of M&A in the defence sector is the likely narrowing of market participants supplying equipment to the Armed Forces – given that it is such an important factor underpinning the proper functioning of open markets.
Fortunately, the Business Secretary is minded to consider exactly this question during his deliberations!
If consolidation serves to tackle the problem of persistent delays and cost overruns on defence procurement programmes, then one can be sure that government will be in favour of it. Sadly, the reality is that consolidation only makes the situation worse because it leads to concentration and a reduction in competition.
Consider this simple fact. According to statistical data cited by House of Commons Library briefing paper CBP 08486 (on p32), over 42% of MoD’s expenditure on defence procurement for 2017-2018 amounting to over £17bn was spent on just ten suppliers. What’s more, this market share has remained pretty much the same over the last decade. Even the then C&AG, Sir Amyas Morse (who was previously Commercial Director at MoD) came around to the view that there is unhealthy market concentration in the defence industry. The current National Security Adviser who was previously MoD Permanent Secretary has also acknowledged that the defence equipment market has become much more concentrated.
It is hard not to conclude that this stranglehold by the Select Few has been the cause of poor performance and a lack of competitiveness – characterised by persistent delays, cost overruns and chronically weak export performance.
Market concentration has been allowed to grow unhindered over the last several decades because successive generations of MoD civil servants and Ministers haven’t got a clue how free markets work, not least, because they have never “felt the heat” of competitive market forces or spent a single day of their lives in the private sector.
The good news is that development of competition policy has now been taken out of the hands of MoD and transferred to BEIS under this pro-market, pro-competition government – which opens up the possibility that the Business Secretary could exercise his powers to direct the Competition and Markets Authority to conduct an investigation into the state of the defence equipment market.
Instead of following the usual tried-and-failed MoD-driven approach, this probe should be led by BEIS informed by the CMA investigation with inputs from 10 Downing St, Cabinet Office, HM Treasury, FCO, DIT and MoD.
Sharpening competition has the beneficial effect of offering the opportunity to elicit input of private sector investment capital into each phase of MoD equipment procurement programmes, thereby relieving the burden on the public purse and freeing up much needed taxpayer funds that can be diverted onto the “levelling up” mission.
An innovative proposal on how to elicit private sector investment capital into defence procurement programmes is set out in a written submission to the Public Accounts Committee which completed its inquiry into Defence Capability and the Equipment Plan 2019-29 last year.
The pdf copy of this paper can be accessed via this link:
https://committees.parliament.uk/writtenevidence/5413/pdf/
@JagPatel3
Re: Market concentration in the defence industry
Lewis, formerly of this parish, was long ranting about the taxpayer endlessly subsidising BAE so it could go and buy American defence companies.
Possible smokescreen?
The economic concerns about selling off IP and industrial capacity are very valid and discussion-worthy concerns.
The defense angles seem less so; We (the USA) already supply a great deal of the warfighting technology Britain uses.
After that unfortunate tea-spilling incident and a little scuffle over taxes, our countries have been getting along like a house on fire, and there's little to no sign of that changing. I'd have no problem sourcing critical technologies and infrastructure from a British company*. This seems like a smokescreen/proxy for the _actual_ valid arguments over whether it's good for the UK economy or not (see first sentence.)
*Jokes about fire extinguishers Made In Britain aside. ;)
LOL
Come on down to the Britannia Unchained sale where you can pick up real bargains today! Two-for-One and 3 for 2 deals available now!