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U.S. Private Equity Agency Advent to Buy British Cobham for $5 Billion

U.S. private equity agency Advent International has consented to pay 4 billion pounds ($5 billion) to buy Cobham, the British defense and aerospace group known for its pioneering air-to-air refueling technology.

Within the newest of a series of buyouts in Europe, with private equity firms searching for new targets for their bumper cash balances, Advent is providing 165 pence in cash for each Cobham share representing a 50% premium to the three-month average price.

Shares in Cobham, whose technology is found on F-35 fighters and Airbus jets, jumped 35% to only above the offer price, the highest they’ve been since March 2016. The deal will be partly funded by about 2.5 billion pounds of debt.

Cobham, which employs 10,000 people and also makes electronic warfare systems and communications for military vehicles, was shaken by a string of revenue warnings in 2016 and 2017, forcing it to boost money from shareholders.

Chief Executive David Lockwood launched into a turnaround strategy two and a half years ago, focused on improving the company’s financial and operating efficiency.

“This offer reflects the potential for future development and bettering efficiency and is an endorsement of our turnaround strategy and our onerous working people,” he stated.

Lockwood’s plan was hampered by issues with Boeing’s troubled KC-46 aerial refueling program, however on Thursday its aid that its free cash flow was higher than expected after a 48.7-million-pound settlement of the issue.

It introduced organic revenue growth of 11% to 1.03 billion pounds and a 12% rise in underlying operating profit to 107.1 million pounds within the half-year to June 30.