DORSET’S aerospace and defence giant Cobham is eyeing a potential merger with another big engineering business which has a site in Weymouth.

Cobham said it was considering a 'possible combination' with Ultra Electronics Holdings.

Ultra responded by saying it had called off discussions which were at a 'very early' stage, raising the possibility that Cobham could mount a hostile takeover.

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Wimborne-headquartered Cobham said in an announcement that “it is currently considering a possible combination with Ultra Electronics Holdings plc … with a view to creating a global defence electronics champion”.

It added: “Ultra and Cobham both have long heritage as innovators, and share advanced complementary capabilities delivering mission critical solutions to the US, UK and other key allies.

“A number of structures are under consideration to effect such a combination, including a contribution of Cobham into Ultra in exchange for new Ultra shares or a possible offer for Ultra by Cobham.

“There can be no certainty that any combination will result, and therefore there is no certainty that an offer will be made for Ultra or Cobham, nor as to the terms on which any such offer will be made.”

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Under the City Code on Takeovers and Mergers, Cobham now has until 5pm on July 23 to announce a firm intention or say that it will not make an offer. The deadline can extended with the consent of the Panel on Takeovers and Mergers.

Cobham has been owned by American private equity firm Advent International since the start of 2020, following a controversial £4billion takeover.

The deal was allowed by the government despite calls for it to intervene to stop the sale of a big player in the UK defence industry. Opponents of the takeover included Lady Nadine Cobham, widow of Sir Alan Cobham, who founded the business as Flight Refuelling.

Ultra Electronics issued a statement as reports of a merger with Cobham emerged.

It said: “Ultra confirms that it was at the very early stages of exploratory discussions around a possible combination of some or all of Ultra's Intelligence and Communications Strategic Business Unit and entities within Cobham's CAES group.

“These discussions took place under a mutual confidentiality agreement between Ultra, Advent and the parent company of Cobham's CAES Group.”

It said the confidentiality agreement “expressly made clear” that the talks would not cover any transactions where the City Code on Takeovers and Mergers would apply.

“In addition, Advent and CAES Parent confirmed in that agreement that they were not actively considering an offer for Ultra,” it said.

It added: “These discussions have now been terminated by Ultra.

“Ultra confirms that it has not received a proposal from Advent, Cobham Group or CAES Parent.”

Ultra Electronics serves the defence, security, critical detection and control markets and is one of the FTSE 250 index of biggest companies on the London Stock Exchange.

Its site at Waverly House on Weymouth’s Granby Estate incorporates work for its maritime, energy and contract electronics manufacturing solutions (CEMS) businesses.

Its site at Innovation House on Ferndown Industrial Estate does work for the energy industry.