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Home arrow Business & Lobbying arrow British defense conglomerate flies out from under the radar to build its name
Business & Lobbying PDF Print E-mail
British defense conglomerate flies out from under the radar to build its name
Posted: 07/07/08 05:47 PM [ET]

As Boeing and Northrop Grumman fight in public for one of the most lucrative defense contracts, one company is certain to profit either way.

British company Cobham will likely win a subcontract on the aerial refueling tanker program from either company.

A bigger challenge for Cobham — which racks up more profit in the United States than back home — is how to make even more money down the line.

After some 15 years of flying under the radar in the United States, Cobham is aiming to make its name known among lawmakers and capitalize on the political process. To that end, Cobham is beefing up its D.C. office to increase its outreach to Congress and the Pentagon.

“The establishment of a more robust Washington office is commensurate with our rapid growth and overall business investment strategy in North America,” said Charlie Stuff, the executive vice president for Cobham’s North America corporate office.

Cobham is building an 18-person Washington office to increase the company’s focus on government relations, international sales and mergers and acquisitions.

Furthermore, Cobham hired O’Brien and Associates as the lobby shop at the forefront of its D.C. build-up.

Across the ocean, the British parent is working on a public relations campaign that will hit the streets in the coming months. Cobham is also planning to start a political action committee (PAC).

“Intensified focus will include ensuring our members of Congress know of the important work Cobham and our employees are doing in their districts and states,” Stuff said.

While Cobham is planning to acquire even more in the United States, standing to add to its $1.4 billion U.S. revenues, the company also will have to deal with a Congress increasingly wary of foreign investment in the defense industry.

In many ways, Cobham — one of the largest British companies — serves as an example of what it takes for a U.S. subsidiary to build its presence in Washington.

To an extent, timing has played a role; U.S. defense spending is at an all-time high, with an approximately $600 billion annual budget, while the decline of the U.S. dollar gives Cobham’s pound-rich war chest more weight to buy into the market.

Cobham isn’t alone in its approach, as other European companies have looked to U.S. acquisitions. Just recently, Italian conglomerate Finmeccanica announced it was going to buy DRS Technologies, a medium-sized defense company with several lucrative Pentagon contracts.

Meanwhile, BAE Systems , also a British company, became one of the top defense contractors in the world after a series of strategic U.S. acquisitions that culminated in United Defense and Armor Holdings.

Despite its success in the U.S., Cobham officials acknowledge that Washington lawmakers know little about the company. They say it will take an intense awareness and re-branding campaign to achieve the necessary pull on Capitol Hill.

Cobham, pronounced with a silent H, employs close to 5,700 people across the U.S. It was on both the Northrop Grumman team and the rival Boeing tanker team. The company stands to gain up to $1 billion over the life of the tanker program with Northrop Grumman, for which it is supposed to provide digital refueling pods as well as antennae and avionics equipment. For Boeing, Cobham was supposed to build additional fuel tanks for the 767.

Aside from the tanker deal, Cobham has a stake in several major Pentagon contracts, such as the F-22 Raptor, the Joint Strike Fighter, the Global Hawk unmanned aerial vehicle, the Joint Cargo Aircraft, the Army’s Stryker vehicles and the Mine Resistant Ambush Protected Vehicles, or MRAPs.

One of the harder tests for the company will be explaining what it actually does. Its portfolio includes electronic systems, avionics and surveillance, military communications, missile defense, intelligence and civil aviation. To that end, it has recently built four divisions dealing with defense electronic systems, avionics and surveillance, mission systems and aviation services.

Cobham started out as a holding company that since 1993 has bought 24 American companies across 18 states. And Cobham is not stopping at that. The company is planning to buy up more companies in the U.S., but officials have refused to say how much money they are willing to spend.

The U.K. defense market is under extreme pressure. Less than 5 percent of Cobham’s technology division revenues emanate from there.

At the same time, Cobham has made some significant acquisitions in the United States. This year it bought Sparta Inc. , a missile defense and intelligence company, for $416 million and M/A-COM, a military microwave and radio frequency company, for $425 million. That transaction is still going through a Committee on Foreign Investment review.

As large as Cobham has grown, it has struggled to establish a brand name in Washington. For example, it purchased Sargent Fletcher , a high-profile name in aerial refueling, in 1994, yet most people still recognize the acquired company by its former name and not Cobham.

By stepping up efforts to get the Cobham name out to lawmakers, the company is making sure its interest will be protected in policy and spending bills. More name recognition would also give the company more muscle when fighting for defense programs it shares with the large prime contractors.

Cobham will be spreading money around by building its own PAC, though so far it has inherited one from Sparta.

For 2008, Sparta made $47,500 in contributions. The top recipient is Sen. Richard Shelby (R-Ala.), a defense appropriator. So far, Cobham employees only contributed $2,500 to the 2008 election in individual contributions, according to the Center for Responsive Politics.

Sparta Inc. alone has employees in some key districts. Rep. Bud Cramer’s (D-Ala.) has 286 employees, Rep. Jim Moran’s (D-Va.) has 213 Sparta workers and Rep. John Sarbanes (D-Md.) has 86 in his district.

Lansdale Inc., a company Cobham bought last year, employs 377 people in Rep. Allyson Schwartz’s (D-Pa.) district. Another company under Cobham’s umbrella, Remec, has 1,006 employees in Rep. Duncan Hunter’s (R-Calif.) district. Sargent Fletcher employs 190 people in Rep. Hilda Solis’s (D-Calif.) district.

 
 
 
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