Surrender with grave implications: ALEX BRUMMER on the ‘abomination’ of UK defence giant Cobham, founded by the man who inspired flying hero Biggles, being taken over by the US
At 9.54pm on Friday – when most of the country was relaxing – Andrea Leadsom made the most important decision of her short period as Business Secretary.
She consigned one of Britain’s leading-edge aerospace concerns, Cobham, into the hands of a consortium of ruthless private equity firms.
The last-minute announcement before the holiday season reminded me of one of the earliest lessons I learnt as a financial writer.
Keep your eyes peeled for annual general meetings held on the eve of Christmas: a black-hole for news, with most national newspapers not publishing City pages, politicians far from Parliament and most business leaders either sliding down ski slopes or sunning themselves in Barbados.
Inspiration for Biggles: Sir Alan Cobham. Advent’s £4billion bid for flight-refuelling pioneer Cobham, based in Dorset and founded by flying ace and Biggles model Sir Alan Cobham, was an abomination from the moment it was unveiled
Bluntly, this was the worst time to make a decision of such enormous consequence.
Advent’s £4billion bid for flight-refuelling pioneer Cobham, based in Dorset and founded by flying ace and Biggles model Sir Alan Cobham, was an abomination from the moment it was unveiled. A gutless board headed by serial corporate seller Jamie Pike surrendered at the first smell of cordite.
War hero and aviation trailblazer Sir Alan will have spun in his grave.
Even more irresponsibly, the board, aided and abetted by spineless investors thinking only of the short-term, failed miserably to get the best deal.
The price paid gave the illusion of good value. But the bid, when unveiled in July, was at a moment when the pound had been wounded by Brexit shenanigans.
Shares in FTSE250 companies had sunk under the shadow of uncertainty. Since this month’s general election the stock market has risen sharply – which means Cobham is being sold off on the cheap.
When Britain’s national security and defence are at stake there is no excuse for government being anything other than 100 per cent sure that secrets and technology won’t fall into the wrong hands.
Leadsom’s assertion that undertakings made by the new owners would ‘mitigate the national security risks’ are simply not as robust as they should be.
All of those who read the report, with its pages of redactions on security grounds, could not be anything but alarmed that a responsible government would have allowed Cobham to end up in such unsuitable hands. The notion that somehow the undertakings can be enforced behind the closed doors of private equity ownership is naive.
The Government signed off the takeover of Cobham on Friday after Advent proposed a number of legally binding obligations to protect the UK’s interests. The Dorset-based manufacturer is a chief provider of aviation services for the RAF
The private equity model is based on making covert decisions without scrutiny from investors, the workforce or government.
It is also deeply suspect for those of us who believe in long-term strategic planning for enterprise and entrepreneurship. Private equity firms finance their activities with cheap debt, absorb any cash sitting in the balance sheet, slash production lines and jobs and sell off bits of the enterprise piecemeal. In Cobham’s case that means sacrificing brilliant satellite technology just as President Trump has declared space to be the next security frontier.
It is ironic that Boris Johnson publicly endorsed Leadsom’s misjudged ruling while visiting British Nato troops on the front-line of the new Cold War in Estonia.
Outside the umbrella of the MoD and the Pentagon, valuable UK space and avionics technology could easily end up in the hands of Russian hackers or Chinese saboteurs.
About one thing we can be certain. None of the UK’s allies with significant defence budgets, most notably France and the US, would allow a defence and aviation powerhouse as significant as Cobham to end up in anonymous overseas hands.
The Government’s justification for approving the deal is that not to have done so would have sent a bad signal to international investors who have made Britain Europe’s top destination for inward investment. David Cameron’s administration engaged in similarly untutored rhetoric and actions with disastrous consequences.
The UK’s cutting-edge smart-chip company Arm Holdings (a product of Cambridge University R&D) was sold to Japan’s Softbank for £25billion. The new owners immediately arranged to sell the highly profitable Pacific part of the business to China, spiriting away valuable patents and expertise to Beijing. Another 25 per cent of Arm ended up in the hands of Saudi Arabia.
It could have been even worse. A media and political campaign against overseas takeovers saw the UK’s top pharmaceutical group AstraZeneca (AZ) saved from the hand of US predator Pfizer in 2014.
Subsequently, AZ has become one of the most valuable drugs firms in the world through the development of ground-breaking immunology treatments used to alleviate and even cure some cancers.
An attempt to merge Britain’s top defence firm BAE Systems with EU-controlled Airbus was also dodged despite tentative government approval. Had the deal not been defeated, then the UK would have been deprived of controlling its own naval and aerospace military platforms.
Andrea Leadsom aided and abetted by Boris Johnson has made a really poor defence and business decision.
Overseas buyers seeking to swoop on the UK’s superior intellectual property, patents and R&D will be licking their lips at the prospect of acquiring assets on the cheap and without effective challenge.
Family behind UK defence firm Cobham slams the Government for ‘trying to hide’ £4bn US takeover by timing it so close to Christmas
The family behind defence giant Cobham has slammed the Government for sneaking out a decision to approve its £4billion takeover by a US private equity firm.
Ministers were accused of burying bad news by slipping out the announcement at almost 10pm on Friday.
Lady Cobham said the decision to allow Advent International to buy the company had been ‘cynically timed to avoid scrutiny on the weekend before Christmas’.
Lady Cobham (pictured) said the decision to allow Advent International to buy the company had been ‘cynically timed to avoid scrutiny on the weekend before Christmas’
Advent swooped on the Dorset-based aerospace firm in July and shareholders waved through the deal in September.
The company, which employs 1,700 in the UK, was founded in 1934 by Sir Alan Cobham, who pioneered the technology that allows planes to refuel in the air.
Although Cobham bosses had expected the sale to meet little opposition, it faced criticism from the founding family, high-ranking military figures, Tory grandee Lord Heseltine and MPs.
The Government then asked the Competition and Markets Authority to probe concerns that the sale posed a threat to national security.
Business Secretary Andrea Leadsom (pictured) allowed Advent to buy Cobham with a number of conditions attached
Business Secretary Andrea Leadsom allowed Advent to buy Cobham with a number of conditions attached.
But Lady Cobham, the 76-year-old widow of Sir Alan’s son Sir Michael Cobham, was furious. She said: ‘The Government’s attempt to conceal the news of Cobham’s fate, by announcing it over the pre-Christmas weekend, shows an indifference to the concerns of the defence community and a blind commitment to free market ideology.
‘I support Great Britain being open for business, but as geopolitical tensions rise amid proliferating trade disputes, our allies are raising barriers to protect their own domestic defence manufacturers, and we are naive not to follow their lead.’
A spokesman for the Department for Business insisted: ‘The decision on the public interest intervention was taken by the Secretary of State late on Friday afternoon, and was announced as soon as possible after concluding discussions on the economic undertakings offered by the parties.’
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