Notice

Proposed acquisition of Ultra Electronics Holdings plc by Cobham Ultra Acquisitions Limited: public update, 28 April 2022

Updated 28 April 2022

Business Secretary Kwasi Kwarteng agrees to further talks ahead of deciding whether to refer Cobham’s proposed acquisition of Ultra for a Phase 2 investigation by the Competition and Markets Authority.

The Business Secretary has powers under the Enterprise Act 2002 to intervene in certain mergers on public interest grounds. Today’s update follows the completion of the Phase 1 process during which the Competition and Markets Authority conducted an initial investigation of the transaction and submitted a report to the Business Secretary.

The Department for Business, Energy and Industrial Strategy is continuing to work with the companies involved in the proposed acquisition of Ultra by Cobham on possible undertakings in lieu of a Phase 2 reference under the Enterprise Act 2002. In the light of recent proposals by Cobham, the Business Secretary has asked officials to work with Cobham and Ultra to further explore the possibility of undertakings in lieu of a Phase 2 investigation. He will then consider any suitable undertakings and decide whether it would be appropriate to refer the transaction to the Competition and Markets Authority for a more detailed Phase 2 investigation.

Ultra is a UK publicly listed company that provides application-engineered solutions in mission critical and intelligent systems, primarily for defence and other highly regulated and harsh environment markets.

Further information

The Secretary of State may make a Phase 2 reference to the Competition and Markets Authority under section 45(4) of the Enterprise Act 2002 if he believes that is or may be the case that:

• arrangements are in progress which, if carried into effect, will result in the creation of a relevant merger situation
• the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the UK for goods or services
• the interests of national security (being the public interest consideration mentioned in the public interest intervention notice) are relevant to a consideration of the relevant merger situation concerned; and
• taking account only of the substantial lessening of competition and/or the interests of national security, the creation of the relevant merger situation may be expected to operate against the public interest.

On 16 August 2021, Cobham and Ultra announced that they had reached agreement on the terms of an acquisition of Ultra.

On 18 August 2021, the Secretary of State for Business, Energy and Industrial Strategy issued a Public Interest Intervention Notice (PIIN) in respect of the acquisition.

This instructed the CMA to carry out a Phase 1 investigation on both competition and jurisdictional issues. Meanwhile, the government has been carrying out an investigation on national security grounds.

The ability to intervene in this fashion falls within the Business Secretary’s statutory powers under the Enterprise Act 2002.

The Enterprise Act 2002’s main purpose is to enable the Competition and Markets Authority to scrutinise and intervene in potentially anti-competitive mergers and acquisition activity.

The Enterprise Act 2002 also allows the relevant UK Secretary of State to make a quasi-judicial decision to intervene in mergers on the following public interest grounds:

• media plurality
• the stability of the UK financial system
• to combat a public health emergency

In addition, until 4 January 2022, the Enterprise Act 2002 also allowed the relevant Secretary of State to intervene in mergers on the public interest grounds of national security. The ability to intervene in transactions on the grounds of national security within the Enterprise Act 2002 was replaced by the National Security and Investment (NSI) Act 2021 when it came into force from 4 January 2022.

As this intervention took place before the NSI Act commenced, Cobham’s proposed acquisition of Ultra continues to be assessed under the Enterprise Act 2002.