Kwasi Kwarteng has been pressured to open an in-depth investigation into Ultra Electronics’ private equity takeover.
The Business Secretary will be handed a report today that outlines whether the controversial £2.6billion deal will threaten national security.
Kwarteng, who ordered the review last August, will decide whether to wave it through as it stands, approve it with conditions attached, or refer it to a deeper ‘phase two’ probe.
Security fears: Business Secretary Kwasi Kwarteng (pictured) is under pressure to launch a full-blown investigation into the £2.6bn private equity takeover of Ultra Electronics
There has been a lot of controversy over the proposed US takeover by Advent International of a large British defense group.
Whitehall sources said the decision will hinge entirely on the contents of today’s report by the Competition and Markets Authority (CMA).
These are very rare Phase 2 interventions. But the Business Secretary is facing calls to step up scrutiny of the deal because of Ultra’s role making highly sensitive naval kit – including enemy submarine-hunting sonobuoys.
Last night the former head of the Royal Navy, Admiral Lord West, said: ‘I think it should be referred to a phase two investigation.’
He believes it is ‘absolutely critical for the security of us and Nato that we don’t lose the edge with anti-submarine warfare’.
Critics say that the sale of Ultra to an American private equity company could make Britain less competitive as sub-marine warfare becomes more prominent.
Advent is conducting the deal through Cobham, a British firm it bought for £4billion in 2019.
Advent’s reputation took a hit after it chopped up and sold more than half of Cobham within 18 months of buying the business, despite promising to be a long-term investor.
Defence analyst Francis Tusa said: ‘I really think it should be referred. It’s not being bought by a British firm. The American company that made the Cobham pelt look British is buying it.
‘If it was American it would not be allowed to go through.’
CMA reports must be submitted by today. In the next few months, it will be made available online.
The Government will immediately begin investigating takeovers and asset sales of 17 strategic industries (defence, nuclear, artificial intelligence) under the new laws.
The Enterprise Act of 2002 is currently evaluating the Ultra 3500p share agreement because it was reviewed last year.
The Enterprise Act allows for a takeover, but it can still be brought in to the National Security and Investment Act at a later time. This act is retrospectively applicable.
A Government spokesman said: ‘While the Government welcomes foreign investment, it is right that we fully consider the national security implications of this transaction.’