The US takeover of one of Britain's most sensitive defence companies is to go ahead after a diplomatic row that threatened intelligence sharing.
Advent International's £2.6bn purchase of Ultra Electronics, which makes vital equipment for nuclear submarines, was signed off by the Government on Wednesday following promises designed to protect the UK's national interest.
It comes after US officials threatened to limit defence cooperation with Britain if the deal was blocked.
Boston-based Advent has agreed to place Ultra’s top-secret businesses into two separate legal entities. These will each have a Government-appointed director to protect British national security interests and report to the state if the company tries to sell or pare back services important to defence.
As reported by The Telegraph in February, Britain will have powers to seize control of important operations if deemed necessary.
The Business Department said: “The Secretary of State for Business, Energy and Industrial Strategy has accepted statutory undertakings from the parties involved in the proposed acquisition of Ultra Electronics Holdings plc by Cobham Ultra Acquisitions Limited and the acquisition will not therefore be referred to the Competition and Markets Authority for a further assessment.”
Among other projects, Ultra makes equipment critical for the Royal Navy’s sonar systems.
At least half of the directors of the board of the company will be British, as will its chairman. The deal will last for as long as Advent owns Ultra, which it is purchasing through one of its previous British acquisitions, Cobham, a maker of air-to-air refuelling systems.
The agreement is being touted as much stronger than prior undertakings, such as a “good custodian” pledge Advent made ahead of its Cobham deal, which was a prelude to a string of asset sales.
The department said: “After considering the representations received, the Secretary of State remains of the view that the proposed undertakings (with minor changes to reflect the representations received) mitigate the national security risks identified to an acceptable level.”
American sources said in May that Mr Kwarteng's perceived reticence on Ultra was damaging one of the UK's most important relationships.
Congress recently lifted restrictions on British companies such as BAE Systems and Rolls-Royce.
A senior US Congressional intelligence insider said: “At a time when allies like the US and the UK are looking to deepen defence cooperation, we need to remove obstacles, not create them.”
The sale completed a saga that began a year ago when Advent made a bid for Ultra after talks over a smaller-scale tie-up between the two sides collapsed.
Mr Kwarteng ordered the Competition and Markets Authority to investigate the deal last August. It reported back in January and the deal had been largely in limbo since then.