Cobham buys M/A-COM

British aerospace and defense company Cobham has taken its acquisition spending in the U.S. this year past the $1 billion mark with the announcement here that it is buying M/A-COM from Tyco Electronics for $425 million.

M/A-COM is a world leading radio frequency components and subsystems suppliers with revenues in the year to September 2007 totaling $477 million. Just under 40 percent of that is in the aerospace and defense sector.

Cobham said it intends to sell off the commercial sector of the business, as it is noncore. Based on the encouraging levels of interest expressed by other bidders during the Tyco auction of M/A-COM, it expects a quick sale of the business, it said.

The aerospace and defense portion of the business employs some 1,000, based principally in California and Massachusetts. Company supplied systems can currently be found on the Joint Strike Fighter, Advanced Medium-Range Air-to-Air Missiles and Integrated Defense Electronic Countermeasures.

The Wimborne, England-based company said in a statement announcing the deal that the purchase is highly complementary to its Defence Electronic Systems Division business and a "significant step forward" in the execution of its strategy to become a global Tier 2 subsystem supplier of integrated radio frequency front ends for radars and electronic warfare systems.

Since the start of the year, Cobham has announced or completed four acquisitions in the U.S. market requiring the company to splash the cash to the tune of some $1.1 billion, although allowable tax expense relating to goodwill amortization on two of the purchases will reduce acquisition costs.

Before now, the largest of these was the purchase of U.S. intelligence and missile defense company Sparta. That $416 million deal is expected to be completed in the next few weeks.

Other moves include the $240 million purchase of the Lansdale-based Surveillance and attack business of BAE Systems in the U.S., and the $38 million purchase of avionics supplier S-TEC.

The Lansdale business develops and supplies electronic warfare subsystems for military aircraft and is another part of a growth drive into the U.S. defense electronics industry that has seen Cobham make 10 acquisitions in the sector in 14 years, said chief executive Allan Cook.

"In 2007, the division [Cobham Defence Electronic Systems] delivered $600 million of revenue and a 24 percent return on capital invested," Cook said. "With Lansdale and M/A-COM, we will have pro-forma revenue of $850 million in defense electronics."

Cobham's growth strategy - it has also purchased companies like REMEC - has seen the U.S. element of the business advance from 31 percent of company revenues to 47 percent in 2007, when it had total revenues of just over $2 billion.

The Sparta and Lansdale acquisitions would push that U.S. revenue figure to about 55 percent.

Source: A. Chuter - Defense News

To find out how your company can successfully compete for European defence and aerospace procurement opportunities, contact Jeffrey Strategic.