The potential transaction is the latest example of U.S. buyers eyeing U.K. aerospace. Cobham Ltd., the U.K. defense contractor that was acquired by U.S. private equity firm Advent International Corp. in early 2020, has made a 2.6 billion-pound buyout approach for Ultra Electronics Holding Plc. The government scrutinized the first Cobham deal and said it would do the same for the Ultra proposal. TransDigm completed the acquisition of Cobham’s communications and navigation division in January, after competing with buyout funds for the unit.
The company’s balance sheet could support a deal of around $10 billion, analyst Sheila Kahyaoglu of Jefferies, told clients Wednesday. The deal could be funded in the debt market, but leaves a tight window and may require $1 billion of equity, she wrote in a report, adding: “This could have been one reason for an over the top bid if financing was not arranged yet.”
The UK has a world class aeronautics industry that is trading at fire sale prices because of the massive decline in civilian plane traffic. The pandemic has created a dislocation on par with 9/11 but has lasted for 18 months instead of 2 months. That’s forced companies to trim growth expectations and to sell off non-core assets in an effort to survive. That’s creating an opportunity for better capitalised longer-term investors.Click HERE to subscribe to Fuller Treacy Money Back to top