Feb 1, 2023
Advent-Backed Cobham Studies Takeover of US Defense Peer Mercury
(Bloomberg) -- Advent International-backed UK defense firm Cobham said it’s weighing an acquisition of Mercury Systems Inc., a US peer that this week announced it’s exploring strategic alternatives.
Shonnel Malani, an Advent managing partner and Cobham’s chairman, said in an interview Wednesday that the company is looking seriously at Andover, Massachusetts-based Mercury as defense spending increases around the world.
“Mercury would be the perfect fit,” he said, adding that Cobham and Mercury are both leading global players in the servicing of radar components.
Malani’s comments come a day after Mercury announced it had begun a strategic review. Shares in the company, which has come under pressure from activists including Elliott Investment Management and Jana Partners, had fallen 11% in New York over the past 12 months. The shares rose as much as 18% Wednesday and closed up 12% to $56.19 in New York trading for their biggest one-day gain in almost three years, giving the company a market value of about $3.3 billion.
Mercury is one of the last remaining independent, public suppliers of sophisticated electronics for the aerospace and defense industry. Its clients include the US government, meaning any purchase could draw oversight from regulators in Washington who have been paying closer attention to deals in critical and sensitive industries.
Advent bought Cobham in a £4 billion ($4.9 billion) deal in 2020. It has since been seeking to expand the business via acquisitions, buying British defense firm Ultra Electronics Holdings Plc. Advent has also made an offer for US satellite imagery provider Maxar Technologies Inc.
“Defense spending is increasing and private capital can play a crucial role here,” Malani said. “We’re not just buying companies, we genuinely want to develop them strategically.”
(Updates with closing share price in fourth paragraph.)
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