Brexit and the"Cobham" Take-over Bid
Even in these dog days of the EU-UK relationship, the legal complexities of that relationship continue to have some bite, at least in matters of mergers and take-overs.
On 25th July 2019, Cobham, a UK defence contractor, announced that it had agreed to a take-over bid from a UK private equity house, Advent International, in a deal worth approximately £4 billion.
On 16th September 2019 the shareholders of Cobham approved Advent's 165p per share offer by a large majority, although there were some notable dissenters particularly from Cobham's founding family who felt that the offer undervalued Cobham and weakened the UK defence industry,
Andrea Leadsom, the UK Secretary of State for Business, Energy and Industrial Strategy, has now intervened by causing to be issued a "European Intervention Notice" under section 67 of the UK Enterprise Act 2002, basically asserting the right of the UK Government to intervene in the merger process on national security grounds as allegedly permitted by article 21(4)of the EU Merger Regulation ( Council Regulation (EC)No 139/2004 .
Article 21(4) permits EU Member States in the context of mergers with an EU dimension to "take appropriate measures to protect legitimate interests ..." such as "public security, plurality of the media and prudential rules".
The terms of the European Intervention Notice issued on behalf of the Secretary of State require the UK Competition and Markets Authority to investigate and report on the national security public interests considerations of the Cobham merger by midnight at the end of 29th October 2019. This would presumably enable the Secretary of State to take appropriate measures to prohibit the merger in line with existing UK and EU competition law rules prior to Brexit ( currently scheduled for 31st October 2019, 11pm UK time) without being trapped by any legal vagaries of the Brexit effect.
In a sense, this story has little to do with Brexit and much more to do with the UK's perceived need to safeguard its defence industry. From the legal perspective, however, the Secretary of State's attention to the legal niceties shows that the UK is not seeking to ignore its duties under the EU Merger Regulation.
It is to be hoped that post-Brexit (if Brexit occurs) the UK and EU merger authorities will be able to work in a compatible way across their territories so that businesses can retain advantages of as much legal certainty as possible in matters of mergers and take overs having a cross-border UK-EU dimension.
