Ultra confirms rumours on major US acquisition

Defence and energy supplier, Ultra Electronics, has confirmed media speculation that it is set to complete a major acquisition.

Ultra, which has operations in Birmingham and Staffordshire, has confirmed it is in advanced discussions to acquire the whole of the issued share capital of New York Stock Exchange-listed Sparton Corporation.

Sparton’s Engineered Components & Products division is Ultra’s partner in the long-standing Erapsco joint venture.

Should Ultra acquire Sparton, it intends to sell Sparton’s other business, the Manufacturing & Design Services division.

In 2014, Erapsco was awarded a supply contract by the US Navy, which runs until 2019. So far, orders worth $664m have been received and a further $160m of purchase orders are expected to be added in FY18.

Ultra said its participation in the JV had given it extensive knowledge of the US Department of Defense and was therefore in a strong position to preserve the status quo for the US Navy and ensure that the delivery of critical assets was not interrupted.

It said its main reasons for the proposed acquisition of Sparton were:
·      The ECP division of Sparton is an excellent strategic fit with Ultra’s existing activities in a market segment in which the group has extensive experience and well-established customers
·      It enhances Ultra’s continuing relationship with a major customer
·      It increases exposure to the growing sonobuoy segment
·      It offers attractive financial returns for Ultra
·      It provides Ultra with an important revenue and earnings stream

The acquisition, if agreed, is expected to be funded by Ultra’s existing debt facilities and an equity placing of new shares representing up to 9.99% of Ultra’s existing ordinary share capital.

Ultra said a further announcement regarding its potential interest in Sparton would be made if and when appropriate.