INSIDE THE DEAL
Eaton buys Cobham aerial refuelling wing in $2.8bn deal
3 February 2021 By Harry Lye
Lockheed Martin CEO James Taiclet. Image: Lockeed Martin
Cobham’s aerial refuelling wing Cobham Mission Systems (CMS) has been sold to US-headquartered diversified industrial manufacturer Eaton for $2.8bn, 14 times the company’s 2020 earnings.
US private equity fund Advent International bought Cobham last year and subsequently restructured the historic aerospace company into nine divisions including CMS. The sale prompted concerns from opponents that Advent would split the company up to sell off its components.
In a statement, Eaton industrial sector president and chief operating officer Heath Monesmith said: “Cobham Mission Systems' highly complementary products and strong position on growing defence platforms will enhance our fuel systems business and position our Aerospace business for future growth.”
Eaton’s existing offering includes aerial and ground refuelling components. The company is based in Ireland but is headquartered in the US.
The deal is expected to close in the second half of 2021, subject to regulatory conditions.
Commenting on the sale, a government spokesperson told us: “We are aware of the sale of Cobham Mission Systems to Eaton Corporation and the Government remains in regular contact with Cobham Limited.”
In November 2019, the government announced it was consulting on steps to address national security concerns associated with the sale of Cobham to Advent. At the time, the government said it was satisfied by the steps taken to mitigate national security risks and cleared the merger.
Previously, Cobham offloaded its 13% stake in Airtanker and has also sold its antenna and radio business unit Cobham Aerospace Connectivity to TransDigm for $965m.
// Image: Cobham is a major subcontractor for the Boeing KC-46 programme. Credit: Cobham Mission Systems.
Controversy remains over the deal
When the State Department gave Congress informal notice of the potential deal last month, Chairman of the House Committee on Foreign Affairs Representative Eliot L. Engel said that the sale “would significantly change the military balance in the Gulf and affect Israel’s military edge” adding that rushing approval of the deal was “not in anyone’s interest”.
Engel added: “My consideration of this sale will include several factors. First, we must maintain Israel’s qualitative military edge, as provided in US law, and ensure Israel’s military superiority in the region, as Israel remains our most crucial ally there. Israel currently has exclusive access in the region to the F-35, which has guaranteed its military edge over the last several years. As Congress reviews this sale, it must be clear that changes to the status quo will not put Israel’s military advantage at risk.”
The lawmaker said that increased activity from Russia and China in the Middle East meant that Congress would need ‘unimpeachable assurances’ that the fighter’s advanced technologies would be safeguarded. He added that a sale to the UAE would ‘inevitably’ generate demand for the jet from other neighbouring countries. In October, Qatar made a formal request to purchase the F-35.
Senate Foreign Relations Committee Ranking Member Senator Bob Menendez said: “As feared, the details of this proposed sale suggest President Trump is seeking to rush through an increase of complex weapons systems into a volatile region seemingly without serious consideration of US interests or the legal parameters of Israel’s qualitative military edge.
“Claiming Israel will maintain its edge while offering Abu Dhabi the same number of these sophisticated stealth warplanes as Israel simply does not add up. Recklessly accelerating the timeline around a reportedly artificial deadline precludes sufficient consideration of these issues by the national security professionals in the Departments of State and Defense.”
Menendez added: “Congress has statutory authority over foreign arms sales and our responsibilities will not be relinquished. The American public has a right to insist that the sales of US weapons to foreign governments – especially those of this magnitude and lethality – are consistent with US values, our national security objectives, and the safety of our closest allies.
“The Trump administration’s refusal to answer our questions about how the national security interests of both the US and Israel will be served, or undermined, by such a sale is a sure-fire way not to get Congressional support to move forward with this sale.”
Will President-elect Biden change course?
After the potential F-35 sale became public in October, Anthony Blinken, a Foreign Policy Advisor to Biden and former Obama-era official, was reported by the Jerusalem Post as saying that he had ‘concerns’ about what commitments the US Government may have made to the UAE.
Since then, US President Donald Trump lost his re-election bid, with President-elect Joe Biden set to take office in January. Democrat Senator Chris Murphy said that the Trump administration approving the sale after losing the election was “completely inappropriate”, adding: “It's a transparent attempt to narrow options in the Middle East for President-elect Biden when he takes office.”