Cobham Regulatory News (COB)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

20 December 2019

RECOMMENDED CASH ACQUISITION

of

Cobham plc ("Cobham")by

AI Convoy Bidco Limited ("Bidco")an indirect subsidiary of funds managed byAdvent International Corporation ("Advent")

On 25 July 2019 the boards of Bidco and Cobham announced that they had reached agreement on the terms of a recommended cash acquisition of the entire issued and to be issued ordinary share capital of Cobham by Bidco (the "Acquisition"). The Acquisition is to be effected by means of a scheme of arrangement under Part 26 of the Companies Act 2006 (the "Scheme").

Topco, Bidco and Cobham confirm that they have reached agreement with the Panel in respect of certain legally binding post-offer undertakings to be given, conditional upon the Scheme becoming effective in accordance with its terms, in connection with the Acquisition, the terms of which are set out below.

Post-Offer Undertakings

Each of Topco, Bidco and Cobham makes the following post-offer undertakings pursuant to Rule 19.5 of the Code, subject to the qualifications and conditions set out below (each of the post-offer undertakings in paragraphs 1(a), 1(b), 1(c), 2(a), 2(b), 2(c), 2(d), 3 and 4 being a "Post-Offer Undertaking" and, together, the "Post-Offer Undertakings"):

1. Each of Topco and Bidco undertakes to procure, and Cobham undertakes, that throughout the Undertaking Period:

(a) Communications & Connectivity will maintain a headquarters in the United Kingdom, by occupying a designated area in one or more buildings in the United Kingdom, one of which buildings is publicly designated as a headquarters for Communications & Connectivity;

(b) Aviation Services UK will maintain a headquarters in the United Kingdom, by occupying a designated area in one or more buildings in the United Kingdom, one of which buildings is publicly designated as a headquarters for Aviation Services UK; and

(c) Mission Systems UK will maintain a headquarters in the United Kingdom, by occupying a designated area in one or more buildings in the United Kingdom, one of which buildings is publicly designated as a headquarters for Mission Systems UK.

2. Each of Topco and Bidco undertakes to procure, and Cobham undertakes, that:

(a) the aggregate amount of Research and Development Spend of the UK Cobham Group in respect of the period from 1 January 2020 to 31 December 2024 (the "Expenditure Period") will be at least 4.4% of the aggregate amount of Sales of UK Communications & Connectivity and Mission Systems UK (being the UK businesses of the Cobham Group that undertake research and development as at the date of this announcement) for the Expenditure Period1;

(b) the aggregate amount of Research and Development Spend of the UK Cobham Group in respect of the period from 1 January 2020 to 31 December 2022 (the "Interim Expenditure Period") will be at least 90% of 4.4% of the aggregate amount of Sales of UK Communications & Connectivity and Mission Systems UK for the Interim Expenditure Period;

(c) without prejudice to the Post-Offer Undertakings in paragraphs 2(a) and 2(b), in the event that the aggregate amount of Research and Development Spend of the UK Cobham Group in respect of:

(i) the Expenditure Period is not at least 4.4% of the aggregate amount of Sales of UK Communications & Connectivity and Mission Systems UK for the Expenditure Period, an amount equal to any shortfall shall be spent by the UK Cobham Group as Research and Development Spend in the period from 1 January 2025 to 30 June 2025, and (without prejudice to that obligation) in the event of a failure to do so, and as a continuing obligation, that the remaining balance of any such shortfall is spent by the UK Cobham Group as Research and Development Spend forthwith after 30 June 2025; and

(ii) the Interim Expenditure Period is not at least 90% of 4.4% of the aggregate amount of Sales of UK Communications & Connectivity and Mission Systems UK for the Interim Expenditure Period, an amount equal to any shortfall shall be spent by the UK Cobham Group as Research and Development Spend in the period from 1 January 2023 to 30 June 2023, and (without prejudice to that obligation) in the event of a failure to do so, and as a continuing obligation, that the remaining balance of any such shortfall is spent by the UK Cobham Group as Research and Development Spend forthwith after 30 June 2023; and

(d) throughout the Expenditure Period and thereafter for so long as the Post-Offer Undertaking in paragraph 2(c) applies, financial records of UK Communications & Connectivity, Mission Systems UK and the UK Cobham Group shall be maintained containing and recording all items necessary to assess progress towards compliance, compliance and the likelihood of future compliance with the Post-Offer Undertakings in paragraphs 2(a), 2(b) and 2(c).

3. Each of Topco and Bidco undertakes to procure, and Cobham undertakes, that throughout the Undertaking Period the "Cobham" name will continue to be included in the registered names of those members of the UK Cobham Group which include "Cobham" in their registered names as at the Effective Date.

4. Topco undertakes that throughout the period for which the relevant Post-Offer Undertakings apply, it will not permit any transfer, transaction or arrangement as a result of which it would cease to Control any undertaking or business of the Cobham Group to which any of the Post-Offer Undertakings in paragraphs 1(a), 1(b), 1(c), 2(a), 2(b), 2(c), 2(d) and/or 3 relate in circumstances where that undertaking or business would, immediately following such cessation of Control by Topco, continue to be under the Control of Advent and/or any of its Affiliates.

[1] Note (1): The aggregate amount of Sales of UK Communications & Connectivity and Mission Systems UK for the financial year ended 31 December 2018 was £204.9 million. 

Note (2): Note that the Post-Offer Undertakings contain no restriction on the disposal of businesses or undertakings out of UK Communications & Connectivity or Mission Systems UK or on the re-domiciliation of businesses or undertakings. The extent of the businesses and undertakings that are included within UK Communications & Connectivity and Mission Systems UK may therefore be reduced during the period of the Post-Offer Undertakings.

Qualifications and Conditions

Subject to consulting the Panel in advance and obtaining the Panel's consent to rely on such qualifications or conditions pursuant to Rule 19.5(f) of the Code, each of the Post-Offer Undertakings will no longer apply where the Panel determines that Topco, Bidco or Cobham (as the case may be) is unable to comply with the relevant Post-Offer Undertaking as a result of an event, act or circumstance which none of the following could control: Topco, Bidco, Cobham, any subsidiary undertakings of Topco, Bidco or Cobham from time to time, or Advent.  

Any obligation on Topco, Bidco or Cobham in respect of Communications & Connectivity, UK Communications & Connectivity, Mission Systems UK, Aviation Services UK, the UK Cobham Group, the Cobham Group or any undertaking, business or activity thereof shall, subject to consulting the Panel in advance and obtaining the Panel's consent to rely on such qualification and condition pursuant to Rule 19.5(f) of the Code, subsist only for so long as Advent and/or any of its Affiliates retains Control of any such undertaking, business or activity, and references to "Communications & Connectivity", "UK Communications & Connectivity", "Mission Systems UK", "Aviation Services UK", the "Cobham Group" and the "UK Cobham Group" shall be only to those undertakings, businesses and activities of the Cobham Group or UK Cobham Group (as applicable) over which Advent and/or any of its Affiliates retains Control from time to time.

Definitions

The following definitions apply for the purposes of the Post-Offer Undertakings:

·; "Advent" means Advent International Corporation, a Delaware corporation;

·; "Affiliate" means, in respect of any person:

(a) any person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with that person from time to time;

(b) any funds and/or vehicles managed and/or advised by that person or any person falling within (a) above;

(c) any funds and/or vehicles managed and/or advised by the person (the "Manager") that manages or advises that person; and

(d) any funds and/or vehicles managed and/or advised by the Manager's Affiliates within the meaning of (a) above;

·; "Aviation Services UK" means the Cobham Group's Aviation Services business in the United Kingdom from time to time, comprising currently of businesses of FB Heliservices Limited (a company incorporated in England and Wales with registered number 04137146), FR Aviation Limited (a company incorporated in England and Wales with registered number 00845310), FR Aviation Services Limited (a company incorporated in England and Wales with registered number 01861144), FB Leasing Limited (a company incorporated in England and Wales with registered number 04509877) and Cobham Leasing Limited (a company incorporated in England and Wales with registered number 02941915);

·; "Bidco" means AI Convoy Bidco Limited, a company incorporated in England and Wales with registered number 12110752;

·; "Cobham" means Cobham plc, a company incorporated in England and Wales with registered number 30470;

·; "Cobham Group" means:

(a) Cobham and its direct and indirect subsidiary undertakings from time to time; and

(b) each of Cobham and its direct and indirect subsidiary undertakings and each of their businesses as at the Effective Date,

in each case which, from time to time, are Controlled by Advent and/or any of its Affiliates;

·; "Code" means the City Code on Takeovers and Mergers issued from time to time by the Panel;

·; "Communications & Connectivity" means the Cobham Group's Communications & Connectivity business from time to time, comprising currently of businesses of the Aerospace Communications, Aerospace Connectivity, Wireless, Electrical and Electronic Equipment, and Satcom Maritime & Land business units;

·; "Control" means with respect to a person or business:

(a) direct or indirect ownership of or control over more than 50% of the voting and/or equity securities (or the economic participation therein) of such person or business;

(b) the direct or indirect right to appoint, or cause the appointment of, more than 50% of the members of the board of directors (or similar governing body) of such person or business; or

(c) the direct or indirect right to manage, or direct the management of, on a discretionary basis, the business, affairs and/or assets of such person or business,

and:

(i) a general partner of a limited partnership is deemed to Control that limited partnership and all undertakings under the Control of that limited partnership;

(ii) a manager of a fund is deemed to Control that fund and all undertakings under the Control of that fund; and

(iii) any person which is a subsidiary undertaking of another person shall be deemed to be Controlled by that second person;

·; "Effective Date" means the date on which the Scheme becomes effective in accordance with its terms;

·; "Expenditure Period" has the meaning set out in the Post-Offer Undertaking in paragraph 2(a);

·; "IFRS" means International Financial Reporting Standards as adopted by the European Union;

·; "Interim Expenditure Period" has the meaning set out in the Post-Offer Undertaking in paragraph 2(b);

·; "Mission Systems UK" means:

(a) Cobham Mission Systems Wimborne Limited, a company incorporated in England and Wales with registered number 293529 ("Mission Systems Wimborne"); and

(b) any other undertaking(s) to which all or part of the business of Mission Systems Wimborne has been transferred after the Effective Date,

in each case which, from time to time, are Controlled by Advent and/or any of its Affiliates;

·; "Panel" means the Panel on Takeovers and Mergers, or any successor to it;

·; "person" includes an individual, corporation, partnership, undertaking and any unincorporated body of persons;

·; "procure" includes taking, continuing to take and preserving the ability to take steps to secure a relevant outcome (provided that this shall not be construed as restricting Advent or its Affiliates' freedom to cease to Control any undertaking, business or activity of UK Communications & Connectivity, Mission Systems UK, Aviation Services UK, Communications & Connectivity, the UK Cobham Group or the Cobham Group, but without prejudice to the Post-Offer Undertaking in paragraph 4);

·; "Research and Development Spend" means "Private Venture" or "PV" investment as defined in Cobham's group accounting manual as at 31 December 2018, as recognised in accordance with Cobham's accounting policies and accounting practices in force as at 31 December 2018, applied on a consistent basis, regardless of whether or not it is expensed to the income statement or capitalised;

·; "Sales" means the aggregate standalone revenues of the relevant undertakings, as recognised in accordance with IFRS and as determined in accordance with Cobham's accounting policies and accounting practices in force as at 31 December 2018 applied on a consistent basis; 

·; "subsidiary undertaking" and "undertaking" shall have the meaning given to such terms in the Companies Act 2006;

·; "Supervisor" means RSM Corporate Finance LLP, a limited liability partnership incorporated in England and Wales with registered number OC325347;

·; "Topco" means AI Convoy Topco & Cy S.C.A., a société en commandite par actions incorporated and existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 2-4 Rue Beck, L-1222 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg Trade and Companies Register under number B236607;

·; "UK Cobham Group" means those members of the Cobham Group which are incorporated in the United Kingdom from time to time;

·; "UK Communications & Connectivity" means:

(a) Chelton Limited, a company incorporated in England and Wales with registered number 896823 ("Chelton");

(b) Axell Wireless Limited, a company incorporated in England and Wales with registered number 4042808 ("Axell Wireless"); and

(c) any other undertaking(s) to which all or part of the business of Chelton and/or Axell Wireless has been transferred after the Effective Date,

in each case which, from time to time, are Controlled by Advent and/or any of its Affiliates;

·; "Undertaking Period" means the period from the Effective Date until the fifth anniversary of the Effective Date; and

·; "United Kingdom" or "UK" means the United Kingdom of Great Britain and Northern Ireland.

Further Information regarding the Post-Offer Undertakings

In the event that any Post-Offer Undertaking ceases to apply in its entirety prior to the period for which that Post-Offer Undertaking is expressed (absent a qualification or condition being invoked) to apply , Bidco will make an announcement of such cessation following confirmation by the Panel.

The Post-Offer Undertakings set out in this announcement are in a form acceptable to the Panel, are legally binding commitments and, should the Acquisition become effective, Topco, Bidco and Cobham must comply with the terms of each relevant Post-Offer Undertaking and complete any courses of action committed to within the relevant time periods set out.

Topco, Bidco and Cobham have appointed the Supervisor to monitor their compliance with the Post-Offer Undertakings. In respect of its appointment, the Supervisor has agreed a work-plan with the Panel in order to monitor the compliance of Topco, Bidco and Cobham with the Post-Offer Undertakings.

Topco, Bidco, Cobham and the Supervisor will be required to submit periodic reports to the Panel, in accordance with the provisions of Rule 19.5(h) and (i) of the Code, in respect of the Post-Offer Undertakings.

Enquiries:

Important Notices

Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Bidco and Advent and no one else in connection with the Acquisition and will not be responsible to anyone other than Bidco and Advent for providing the protections afforded to clients of Goldman Sachs International or for providing advice in connection with the Acquisition or in this Announcement or any transaction or arrangement referred to herein.

Citigroup Global Markets Limited ("Citigroup"), which is authorised by the Prudential Regulation Authority and regulated in the UK by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively as financial adviser to Bidco and Advent and no one else in connection with the Acquisition and shall not be responsible to anyone other than Bidco and Advent for providing the protections afforded to clients of Citigroup nor for providing advice in connection with the Acquisition or any matter referred to in this Announcement.

Credit Suisse, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as financial adviser exclusively for Bidco and Advent and no one else in connection with the matters set out in this Announcement and will not be responsible to any person other than Bidco and Advent for providing the protections afforded to clients of Credit Suisse, nor for providing advice in relation to the content of this Announcement or any matter referred to herein. Neither Credit Suisse nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Credit Suisse in connection with this Announcement, any statement contained herein or otherwise.

Merrill Lynch International ("BofA Securities"), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Cobham and for no one else in connection with the Acquisition and any other matters referred to in this Announcement. BofA Securities will not be responsible to anyone other than Cobham for providing the protections afforded to clients of BofA Securities or for providing advice in connection with the Acquisition or any other matter referred to in this Announcement.

J.P. Morgan Securities plc, which conducts its United Kingdom investment banking business as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"), is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom. J.P. Morgan Cazenove is acting as financial adviser exclusively for Cobham and no one else in connection with the Acquisition and any other matters referred to in this Announcement, and will not regard any other person as its client in relation to the Acquisition and will not be responsible to anyone other than Cobham for providing the protections afforded to financial advisory clients of J.P. Morgan Cazenove or for providing advice in relation to the Acquisition or any other matter referred to in this Announcement.

N.M. Rothschild & Sons Limited ("Rothschild & Co"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Cobham and for no one else in connection with the Acquisition and any other matters set out in this Announcement. Rothschild & Co will not regard any other person as its client in relation to the Acquisition or any other matter set out in this Announcement, and will not be responsible to anyone other than Cobham for providing the protections afforded to clients of Rothschild & Co or for providing advice in relation to the Acquisition or any other matter referred to in this Announcement.

Overseas Shareholders

The release, publication or distribution of this Announcement in or into certain jurisdictions other than the United Kingdom or the United States may be restricted by law. Persons who are not resident in the United Kingdom or the United States or who are subject to other jurisdictions should inform themselves of, and observe, any applicable requirements.

Unless otherwise determined by Bidco or required by the Takeover Code, and permitted by applicable law and regulation, the Acquisition shall not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction. Accordingly, copies of this Announcement and all documents relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this Announcement and all documents relating to the Acquisition (including custodians, nominees and trustees) must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction.

The availability of the Acquisition to Cobham Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements, as any failure to comply with such requirements may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.

Rule 26.1 Disclosure

In accordance with Rule 26.1 of the Code, a copy of this announcement will be available at www.cobhaminvestors.com by no later than 12 noon (London time) on the business day following the date of this announcement.

The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.