A £4bn takeover of British defence company Cobham by a US private equity giant is set to go ahead after the UK government said it had reviewed national security concerns and was considering giving the all-clear.
The family of Cobham’s founder have been vocally critical of the deal, warning that it poses “grave risks to national security”. MPs have also voiced concerns.
But business secretary Andrea Leadsom said on Tuesday she was “minded to accept” Advent’s takeover of Cobham after the American firm gave assurances to allay security fears about the controversial deal.
Existing security arrangements which currently apply to Cobham and protect “sensitive” government information will be continued and strengthened, Ms Leadsom said.
Advent has assured that appointments to Cobham’s board will “comply with nationality requirements”. Earlier this month, Advent offered to put Britons in charge of Cobham’s important UK defence contracts.
Cobham’s new owners must honour the terms of existing contracts, notify the Ministry of Defence in advance if there is a material change to Cobham’s ability to supply key services, and refrain from withdrawing from any specified service for a set period.
Advent must also give the MoD prior notice of any future plans to sell the whole, or part of, Cobham’s business. This is to give ministers time to invoke powers designed to protect national security interests that could be affected by transactions.
If these conditions are not met, the business secretary said she would consider referring the deal for further investigation.
In response, Lady Cobham, whose late husband Michael ran the company, said: “Contrary to the assurances given by the Cobham board and Advent in recent months, the Ministry of Defence has identified clear national security concerns regarding this takeover which it says will raise the risk to the UK’s defence capability.
“The proposed undertakings will do little to mitigate these risks and they offer extremely weak protections when Advent sells Cobham on to another buyer.
“From the US to Japan, countries around the world are raising barriers to protect their own domestic defence industries, but this government seems content to bargain away our long-term security in the hopes of nothing more than a quick trade deal with Donald Trump.”
The deal is seen as a test of the government’s industrial strategy, part of which is to assess whether takeovers of significant UK firms are in the national interest.
Ms Leadsom said: “Following my update to Parliament on 5 November, I have now reviewed further national security advice from the Ministry of Defence and met with both Cobham and Advent who have offered legally binding undertakings designed to mitigate national security concerns, which I am minded to accept.
“They will now be considered by a public consultation and I will provide a further update once that process has concluded.
“No decision will be taken on whether to accept the undertakings until the consultation has closed and the representations have been carefully considered.
“This decision on the national security considerations is separate to any discussions on the economic implications of the proposed merger.”