* Offer tops a previous offer by Cobham in June
* Ultra considering offer to shareholders
* Deal may be subject to UK scrutiny over security concerns
* Takeover would help Cobham tap marine defence market
July 23 (Reuters) - Defence group Cobham Ltd has made a $3.6
billion offer to buy UK-based rival Ultra Electronics,
Ultra said on Friday, adding that it was considering
recommending the bid to shareholders.
Shares in London-listed Ultra, whose major customers include
the British and U.S. governments, soared as much as 34% to a
record high of 33.18 pounds on the news, below Cobham's offer
price of 35 pounds per share plus a dividend of 16.2 pence a
The offer, the latest in a flurry of private equity interest
in British companies driven by cheap valuations due in part to
the pandemic and Brexit, is higher than a 28-pounds-per-share
bid made by Cobham in June.
Cobham, based in Dorset, England and founded in 1934, is
known for its pioneering air-to-air refuelling technology. It
was bought last year by Boston-based private equity firm Advent
International, and its U.S. ownership could mean the deal draws
national security concerns in Britain.
Both companies have respective technologies used in the U.S.
F-35 and Eurofighter Typhoon jets.
Ultra, which had rebuffed Cobham's June offer, said it was
considering recommending the latest proposal to shareholders
subject to the agreement of various terms, while Cobham said in
an emailed statement that it welcomed that announcement.
A purchase of Ultra would help Cobham tap the maritime
defence market, where Ultra sells sensors, torpedo and radar
systems, mainly to Western customers. The company also makes a
range of defence communication equipment and forensics software.
Cobham, which makes devices used in electronic warfare and
missiles, said it has "offered assurances that appropriate
national security undertakings will be offered to the UK
government", without elaborating.
Though national security concerns could arise, there are
already other British defence companies with U.S. ownership,
said Peel Hunt analyst Henry Carver.
"I don't think that's going to be a sticking point," Carver
said, noting the strong defence relationship between the two
countries. "This is an offer that shareholders cannot ignore ...
we think it likely that a deal will be done," he said.
Cobham said in June it hoped to create a "global defence
electronics champion" by buying Ultra as they provide
complementary offerings to the United States, UK and other
J.P. Morgan Cazenove is Ultra's financial adviser on the
(Reporting by Yadarisa Shabong in Bengaluru; Editing by Arun
Koyyur, Shailesh Kuber and Susan Fenton)