Advisory firm recommends Advent's £3.9bn offer for Cobham

On 25 July 2019, Advent made a takeover offer of 165 pence per share in cash, which represents a 34% premium on the unaffected share price of the company.

Advent is currently investing from its Advent International GPE IX fund, which closed on $17.5bn in June 2019. The vehicle writes equity tickets of $100-1bn for companies with enterprise values of between $50m-3.5bn.

The offer price values Cobham at forward multiples of 13.5x estimated EBITDA for 2019 and 12.3x estimated EBITDA for 2020. Glass Lewis noted this was greater than average trading multiples of 11x estimated 2019 EBITDA and 9.9x estimated 2020 EBITDA for 18 listed peers.

Advent has received irrevocable undertakings from Cobham directors, who collectively own less than 1% of shares, and Artemis Investment Management, which owns 5.1% of shares.

The board has recommended the takeover offer, while the company's largest shareholder, Silchester International Investors, which owns 11.88% of Cobham shares, has rejected it. The Cobham founding family, which owns 1.5% of shares, has also rejected the offer.

Other shareholders include BlackRock, M&G Investment Management and Legal & General Investment Management.

Since the current CEO David Lockwood joined in 2016, the company has strengthened its balance sheet with a £512m rights issue, sold subsidiaries AcXomm and Wireless, and announced a strategic review of its Australian operations in the aviation services sector. The company has also settled several damages and tax disputes.

At the time of publication, Cobham was trading at 161 pence per share. It reported revenues of £1.86bn in 2018 and an operating profit of £111.9m.

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