Advent International to buy Cobham for £4bn
Aerospace and defence supplier Cobham has agreed to be bought by US private equity firm Advent International for £4bn.
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Under the terms of the deal, Advent will pay 165p per share in cash, which is a 34.4% premium to Cobham's closing share price on Wednesday.
Cobham chairman Jamie Pike said: "Cobham has leading positions in a number of attractive technology markets, with capabilities and know-how that are well aligned with our customers' priorities. The Cobham management team's turnaround actions over the last two and half years have begun to improve our performance, which is reflected in our 2019 interim results announced today. We believe that Advent would provide a complementary partner for Cobham's stakeholders.
"The Cobham board is unanimously recommending the offer from Advent as it represents an opportunity for shareholders to realise their investment in Cobham in cash in the near term."
Pike pointed out that the offer represents a 50.3% premium to the average share price over the last three months.
At 1020 BST, the shares were up 35% at 165.40p.
Neil Wilson, chief market analyst at Markets.com, said: "It’s the latest sign that more firms are happy to go private and take them out of the glare of public markets - Cobham’s had its troubles after a hot streak of profit warnings. It also a sign that weakness in sterling continues to make UK companies attractive to foreign buyers.
"The pound is at its weakest in two years and could bounce on a deal with the EU - carpe diem for foreign buyout specialists. Cobham has had a tough time of it, but since resolving the Boeing dispute it’s reinstated the dividend and shares have risen about 20% or so before the takeover announcement. There may regulatory and political scrutiny of this deal though."
News of the deal came alongside the company's results for the half-year to the end of June, which showed that underlying operating profit rose 12% to £107.1m. Cobham said this reflected another strong result from its mission systems division and an improving performance in communications and connectivity.
Cobham also said that it has decided to begin a strategic review of the Australian operations of the aviation services business.
"The purpose of the review is to decide how best to optimise value in the interests of the company and its stakeholders," it said.
Ian Forrest, investment research analyst at The Share Centre, said the offer price represents a "decent" premium to Wednesday's close and a level not seen by the shares for three years.
"Cobham has struggled over the past three years with sales and profits falling back, but there have been more positive signs in recent results. The move by Advent may attract some attention from the government given the defence implications, although the government is rather distracted with a number of other matters at present. However, the premium being paid by Advent in an all-cash offer is good news for investors."
Olivetree Financial said: "The transaction value is broadly in line with comparable deals however there should be room for a higher price depending on the credibility assigned to Cobham’s margin recovery, potential value creation from a review of the Australian business and any synergy potential for a strategic acquirer."