Shares in defence contractor Ultra Electronics (ULE) flew 33% higher to £32.90 after the company confirmed it had received a takeover offer of £35 per share from private equity-owned rival contractor Cobham just days before the deadline set by the Takeover Code.

The proposed offer follows an initial pitch at £28 per share on 29 June, which was rejected. Including the interim dividend of 16.2p announced earlier this month, the new offer represents a 42% premium to last night’s closing price and a 63% premium to the price on 24 June, the day Cobham first expressed an interest.

Ultra said that, having studied the proposal, ‘the board has indicated to Cobham that it is at a value the board would be minded to recommend to Ultra shareholders’ and it would ‘engage in discussions to explore the proposal in further detail’.

In return, Cobham said it had ‘indicated to the board that it is minded to offer the UK government appropriate undertakings in respect of national security’.

Ultra will seek to extend the ‘put up or shut up’ deadline to make a decision on the offer to 20 August, with the possibility of a further extension at the discretion of the Takeover Panel.

The firm brought forward the publication of its interim results in order to bolster its defence against Cobham’s advances, revealing a stronger than expected trading performance and ‘excellent strategic progress’ in improving its margins with ‘a better payback than originally anticipated’ from its transformation programme.

However, the 40%-plus premium to last night’s close looks like a deal clincher as it is probably enough of a ‘knock-out blow’ to deter a rival bidder and the premium is high enough that major stakeholders such as Invesco, Baillie Gifford, Aviva Investors and Fidelity will tender their shares.


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Issue Date: 23 Jul 2021