The Daily Telegraph

Cobham to be loaded with debt in £4bn deal

British defence company’s new American owners expected to issue more than £1bn in bonds

- By Alan Tovey

Defence giant Cobham is to be loaded up with debt after a controvers­ial £4billion takeover by Advent, the US private equity firm. The 85-year-old British pioneer of air-to-air refuelling is expected to issue more than £1billion of bonds after the deal was waved through by Andrea Leadsom, the Business Secretary, in the face of a backlash from its founding family. Advent is funding the deal with £1.2billion of its own money and using short-term loans for the remainder.

DEFENCE company Cobham is to be loaded up with debt after a controvers­ial £4bn takeover by US private equity firm Advent.

The 85-year-old British pioneer of air-to-air refuelling is expected to issue more than £1bn of bonds following the deal, which was waved through late on Friday night by Andrea Leadsom, the Business Secretary, in the face of a furious backlash from its founding family.

Advent is funding the takeover with £1.2bn of its own money and using short-term loans arranged with banks including Credit Suisse, Citigroup and Goldman Sachs for the remainder.

It is thought that these banks – which are receiving fees totalling more than £120m for funding the deal – are also being lined up to arrange the bonds, further boosting their earnings from the acquisitio­n.

The debt raise sparked fresh concern from critics of the deal including Lady Nadine Cobham, the widow of founder Sir Alan Cobham’s son. She has previously warned the deal would put national security at risk.

Cobham has about 10,000 staff worldwide, with a fifth of them in the UK. Mrs Leadsom launched a review of the takeover in September but did not make a final decision until after this month’s election.

The timing of her announceme­nt drew fire, with critics of the deal calling it “cynical” and accusing the Business Secretary of seeking to avoid scrutiny on the weekend before Christmas.

Advent’s 165p-a-share offer previously won the backing of more than 90pc of Cobham shareholde­rs. Cobham works on sensitive UK defence contracts including training military pilots and providing components for communicat­ions equipment used by the Ministry of Defence and security services. It is also regarded as a leader in air-to-air refuelling technology.

Concerns have centred around the firm falling under the foreign ownership, and potential risks this could pose to UK national security. There have also been worries that under Advent’s ownership work could be moved out of the UK, eroding Britain’s industrial base, along with fears the company could be broken up for a quick profit.

Mrs Leadsom said she approved the sale after it was examined by the Competitio­n and Markets Authority, with advice from the Ministry of Defence and security services. The Government has power to intervene and block deals if they pose a threat to the UK.

However, the Business Secretary said binding undertakin­gs offered by Advent to ease concerns were considered to be enough to mitigate national security risks.

Advent bosses – who say Cobham generates less than 5pc of its sales from the MOD – have pledged to be good custodians of the company and invest in it.

Shonnel Malani, a partner at the firm, said: “We are confident the transactio­n and undertakin­gs being given provide important long-term assurances for both Cobham’s employees and customers, particular­ly in the UK and also globally.”

Since the offer was made in July, Lady Nadine has been one of its fiercest critics. She said: “The ink is barely dry on the Government’s deal and already Cobham is being loaded with debt.

“This makes a mockery of promises to invest in the business and will leave a key part of our defence establishm­ent facing huge interest bills and an uncertain future. How the Government can argue that this is in the interests of the country, or the company’s employees, is hard to fathom.”

Advent declined to comment as did Credit Suisse, Citigroup and Goldman Sachs.

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