Proposed Acquisition of Aeroflex

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES. THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR FORM A PART OF ANY OFFER TO SELL OR SOLICITATION OF AN OFFER TO PURCHASE OR SUBSCRIBE FOR SECURITIES IN THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA, JAPAN, JERSEY OR ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO.

20 May 2014

For immediate release

Proposed Acquisition of Aeroflex Holding Corp. ("Aeroflex")

Cobham plc ("Cobham" and together with its subsidiaries, the "Group") announces that it has entered into a conditional agreement to acquire Aeroflex Holding Corp. ("Aeroflex") for $10.50 per Aeroflex share in cash following completion, giving the proposed transaction an enterprise value of approximately $1,460m (£869m)1. This comprises the total issued and outstanding shares of common stock of Aeroflex and the total outstanding restricted stock units and performance restricted stock units, which are valued at approximately $920m (£548m), together with Aeroflex's net debt of $540m (£321m) at 31 March 2014.

Cobham is paying approximately 10.5x adjusted Earnings Before Interest, Taxation, Depreciation and Amortisation ("EBITDA") market consensus estimates for the year ended 31 December 2014. This is before taking account of expected annualised run rate cost synergies of approximately $85m (£50m) from the combined business, for a total investment of approximately $215m (£128m), with the majority of this programme expected to be implemented in the first three years of ownership2. These synergies are available due to significant complementary capabilities, characteristics and customers, enabling the implementation of a business integration programme leveraging Cobham's Excellence in Delivery ("EiD") expertise. On a pro forma basis, Aeroflex would comprise approximately 17 per cent of the enlarged Group's consolidated revenue.

Headquartered in Plainview, New York, Aeroflex is a leading global provider of radio frequency, or RF, and microwave integrated circuits, components and systems used in the design, development, test and maintenance of technically demanding, high performance equipment for critical and harsh environments and wireless communication systems. Aeroflex services multiple business sectors including commercial space and avionics, commercial wireless, medical, defence, energy and other industries. Approximately 70 per cent of its business is focused on higher growth commercial segments. The business is a leader in all of its primary product areas.

The Board of Cobham believes the Acquisition represents a significant development in Cobham's objective to create shareholder value by delivering sustainable top and bottom line growth, while generating good free cash flow for the following reasons:

· The acquisition is consistent with the Cobham strategic objective of building and maintaining leading positions in selected higher growth, high technology commercial segments. It provides a compelling and complementary strategic fit with Cobham, building on Cobham's focus on connectivity, which was further strengthened by the acquisitions of Thrane & Thrane in 2012 and Axell Wireless in 2013;

· Aeroflex possesses complementary capabilities and characteristics to Cobham with long life cycle products, attractive technology, long standing customer relationships and sole source positions. It has technically demanding components and products, with strong operating margins and cash flow generation. Aeroflex's underlying operating margins and cash flow generation are comparable to the broader Group;

· Aeroflex has complementary products and customers in its Microelectronic Systems business, including passive and active microwave components, integrated microwave assemblies and slip rings, further enhancing Cobham's position as a tier three supplier, and helping generate additional revenue synergies;

· Aeroflex increases Cobham's exposure to growing commercial segments and strengthens key customer relationships in wireless, space, microelectronics, industrial, energy and other sectors, increasing the enlarged Group's commercial revenue from 35 per cent to 41 per cent of the total, on a pro forma basis;

· Aeroflex has maintained consistently high levels of Private Venture ("PV") or company funded Research & Development investment.  As a result of this investment, Aeroflex has developed a strong innovation pipeline, including radiation hardened and power enhanced microelectronics, mixed signal/digital integrated circuits and the industry standard TM500 wireless network test system;

· Aeroflex is expected to deliver highly attractive financial returns, with significant additional value expected from the combined entity of approximately $85m (£50m) in annual synergies from cost savings and operational efficiency improvements, from a total investment of approximately $215m (£128m), with the majority of the programme expected to be implemented in the first three years of ownership2. These will be derived from a focused integration programme across Aeroflex and the wider enlarged Group, to create scale businesses, by leveraging Cobham's EiD expertise.

The estimated financial benefits set out above are contingent on the Acquisition and could not be achieved independently. Such estimated financial benefits reflect both the beneficial elements and relevant costs.

The acquisition of Aeroflex is expected to be significantly accretive to underlying earnings in 2015 and, assuming completion late in the third calendar quarter of 2014, to have a broadly neutral impact on underlying earnings in the current year. Expected returns will beat Cobham's cost of capital in the third full year of ownership3.

Cobham proposes to finance the Acquisition, which includes the refinancing of existing debt facilities of Aeroflex, through bank facilities. In order to maintain an appropriate level of gearing, the acquisition financing will include the proceeds of an equity placing of up to approximately 6 per cent of Cobham's current issued share capital.

The Acquisition constitutes a Class 1 transaction for the purposes of the Listing Rules and therefore requires the approval of Cobham Shareholders. A General Meeting will be held in due course for Cobham Shareholders to approve the Acquisition. The Acquisition is expected to complete late in the third calendar quarter of 2014.

Concurrent with execution of the Merger Agreement, certain affiliates of Veritas Capital, Golden Gate Private Equity and GS Direct LLC have entered into a Support Agreement, pursuant to which, subject to the terms of the Support Agreement, they have agreed to cause VGG Holding LLC, the entity through which such affiliates beneficially own shares in Aeroflex, to vote its shares in favour of adopting the Merger Agreement at the Aeroflex Shareholder meeting called for such purpose. In the aggregate such shares represent approximately 76.3 per cent of the voting share capital.

Cobham's Chairman, John Devaney said:

"This transaction is a compelling strategic fit for us on a number of fronts, bringing together two high technology businesses with complementary capabilities, customers and characteristics. Aeroflex has maintained consistently high levels of company funded Research & Development resulting in a pipeline of products that we expect to further underpin our growth profile, with the business expected to deliver highly attractive financial returns."

Cobham's Chief Executive Officer, Bob Murphy said:

"The acquisition of Aeroflex is absolutely aligned with our strategic objective to obtain more exposure to growing, commercially oriented end markets that increasingly demand more data, connectivity and bandwidth. The scale and complementary nature of the combination enables our two technology businesses to unlock significant synergy benefits to generate increased shareholder value, while supporting our customers even more effectively. Bringing these two companies together further underpins our objective to deliver sustainable organic growth."

A presentation for analysts and investors will be held today at Bank of America Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ, at 08.30 UK time. For further details please call Julian Wais (Cobham) on +44 (0)1202 857738 or Michael Harrison/Tom Williams (Brunswick) on +44 (0) 20 7404 5959. The presentation will be webcast live on the Cobham website (www.cobhaminvestors.com) and the webcast and presentation will be made available on the website for subsequent viewing.

This preceding summary should be read in conjunction with the full text of the following announcement and its appendices, together with the Shareholder Circular which will be published in due course.

About Cobham

Cobham protects lives and livelihoods with its differentiated technology and know-how, operating with a deep insight into customer needs and agility. The Group offers an innovative range of technologies and services to solve challenging problems in harsh environments across commercial, defence and security markets, from deep space to the depths of the ocean, specialising in meeting the growing demand for data, connectivity and bandwidth.

Employing more than 10,000 people on five continents, the Group has customers and partners in over 100 countries, with market leading positions in: audio, video and data communications, including satellite communications; defence electronics; air-to-air refuelling; aviation services; life support and mission equipment.

Enquiries

Merrill Lynch International ("BofA Merrill Lynch"), a subsidiary of Bank of America Corporation, is acting exclusively for Cobham in connection with the Acquisition and for no one else and will not be responsible to anyone other than Cobham for providing the protections afforded to its clients or for providing advice in relation to the Acquisition.

Citigroup Global Markets Inc. ("Citi") is acting as financial adviser to Cobham, and is acting exclusively for Cobham in connection with the Acquisition and for no one else and will not be responsible to anyone other than Cobham for providing the protections afforded to its clients or for providing advice in relation to the Acquisition.

UBS Limited, which is authorised by the Prudential Regulation Authority in the United Kingdom and regulated in the United Kingdom by the Prudential Regulation Authority and by the Financial Conduct Authority, is acting exclusively as joint Corporate Broker for Cobham and for no one else in connection with the placing referred to in this document and is not, and will not be, responsible to anyone other than Cobham for providing the protections afforded to clients of UBS Limited, nor for providing advice in connection with the placing described in this document.

COBHAM PLC

Proposed Acquisition of Aeroflex Holding Corp. ("Aeroflex")

Introduction

Cobham plc ("Cobham" and together with its subsidiaries, the "Group") announces that it has entered into a conditional agreement to acquire Aeroflex Holding Corp. ("Aeroflex") for $10.50 per Aeroflex share in cash following completion, giving the proposed transaction an enterprise value of approximately $1,460m (£869m)1. This comprises the total issued and outstanding shares of common stock of Aeroflex and the total outstanding restricted stock units and performance restricted stock units, which are valued at approximately $920m (£548m), together with Aeroflex's net debt of $540m (£321m) at 31 March 2014.

Cobham is paying approximately 10.5x adjusted Earnings Before Interest, Taxation, Depreciation and Amortisation ("EBITDA") market consensus estimates for the year ended 31 December 2014. This is before taking account of expected annualised run rate cost synergies of approximately $85m (£50m) from the combined business, for a total investment of approximately $215m (£128m), with the majority of this programme expected to be implemented in the first three years of ownership2. These synergies are available due to significant complementary capabilities, characteristics and customers, enabling the implementation of a business integration programme, leveraging Cobham's Excellence in Delivery ("EiD") expertise. On a pro forma basis, Aeroflex would comprise approximately 17 per cent of the enlarged Group's consolidated revenue.

Headquartered in Plainview, New York, Aeroflex is a leading global provider of radio frequency, or RF, and microwave integrated circuits, components and systems used in the design, development, test and maintenance of technically demanding, high performance equipment for critical and harsh environments and wireless communication systems. Aeroflex services multiple business sectors including commercial space and avionics, commercial wireless, medical, defence, energy and other industries. Approximately 70 per cent of its business is focused on higher growth commercial segments. The business is a leader in all of its primary product areas.

The Board of Cobham believes the Acquisition represents a significant development in Cobham's objective to create shareholder value by delivering sustainable top and bottom line growth, while generating good free cash flow for the following reasons:

· The acquisition is consistent with the Cobham strategic objective of building and maintaining leading positions in selected higher growth, high technology commercial businesses. It provides a compelling and complementary strategic fit with Cobham, building on Cobham's focus on connectivity, which was further strengthened by the acquisitions of Thrane & Thrane in 2012 and Axell Wireless in 2013;

· Aeroflex possesses complementary capabilities and characteristics to Cobham with long life cycle products, attractive technology, long standing customer relationships and sole source positions. It has technically demanding components and products, with strong operating margins and cash flow generation. Aeroflex's underlying operating margins and cash flow generation are comparable to the broader Group;

· Aeroflex has complementary products and customers in its Microelectronic Systems business, including passive and active microwave components, integrated microwave assemblies and slip rings, further enhancing Cobham's position as a tier three supplier, and helping generate additional revenue synergies;

· Aeroflex increases Cobham's exposure to growing commercial segments and strengthens key customer relationships in wireless, space, microelectronics, industrial, energy and other sectors, increasing the enlarged Group's commercial revenue from 35 per cent to 41 per cent of the total, on a pro forma basis;

· Aeroflex has maintained consistently high levels of Private Venture ("PV") or company funded Research & Development investment.  As a result of this investment, Aeroflex has developed a strong innovation pipeline, including radiation hardened and power enhanced microelectronics, mixed signal/digital integrated circuits and the industry standard TM500 wireless network test system;

· Aeroflex is expected to deliver highly attractive financial returns, with significant additional value expected from the combined entity of approximately $85m (£50m) in annual synergies from cost savings and operational efficiency improvements, from a total investment of approximately $215m (£128m), with the majority of the programme expected to be implemented in the first three years of ownership2. These will be derived from a focused integration programme across Aeroflex and the wider enlarged Group, to create scale businesses, by leveraging Cobham's EiD expertise.

The estimated financial benefits set out above are contingent on the Acquisition and could not be achieved independently. Such estimated financial benefits reflect both the beneficial elements and relevant costs.

The acquisition of Aeroflex is expected to be significantly accretive to underlying earnings in 2015 and, assuming completion late in the third calendar quarter of 2014, to have a broadly neutral impact on underlying earnings in the current year. Expected returns will beat Cobham's cost of capital in the third full year of ownership3.

Cobham proposes to finance the Acquisition, which includes the refinancing of existing debt facilities of Aeroflex, through bank facilities. In order to maintain an appropriate level of gearing, the acquisition financing will include the proceeds of an equity placing of up to approximately 6 per cent of Cobham's current issued share capital.

The Acquisition constitutes a Class 1 transaction for the purposes of the Listing Rules and therefore requires the approval of Cobham Shareholders. A General Meeting will be held in due course for Cobham Shareholders to approve the Acquisition. The Acquisition is expected to complete late in the third calendar quarter of 2014.

Concurrent with execution of the Merger Agreement, certain affiliates of Veritas Capital, Golden Gate Private Equity and GS Direct LLC have entered into a Support Agreement, pursuant to which, subject to the terms of the Support Agreement, they have agreed to cause VGG Holding LLC, the entity through which such affiliates beneficially own shares in Aeroflex, to vote its shares in favour of adopting the Merger Agreement at the Aeroflex Shareholder meeting called for such purpose. In the aggregate such shares represent approximately 76.3 per cent of the voting share capital.

Information on Aeroflex

Founded in 1937, Aeroflex is a leading global provider of radio frequency ("RF"), and microwave integrated circuits, components and systems used in the design, development and maintenance of technically demanding, high-performance wireless communication systems. The business has 2,600 employees in 20 global locations, including approximately 650 engineers. In its last two full financial years, it has invested between 13 per cent and 14 per cent of its revenue in PV, which has enabled it to launch a number of new and innovative technologies across its businesses, which have good potential for future revenue growth.

Approximately 70 per cent of Aeroflex's business is focused on higher growth commercial segments. Aeroflex's revenue by customer geography in the year ended 30 June 2013 was approximately 55 per cent from the United States, 20 per cent from Europe and the Middle East, 21 per cent from Asia and 4 per cent from other regions. 

Aeroflex has long standing customer relationships and the Acquisition will enhance Cobham's position with commercially orientated companies such as Alcatel Lucent, Cisco Systems, Ericsson, Motorola, Nokia and Philips. The acquisition will also strengthen the existing Cobham relationships with leading aerospace companies such as Boeing, Honeywell, Lockheed Martin, Northrop Grumman and Raytheon. No individual Aeroflex customer accounted for more than six per cent of revenue in the year ended 30 June 2013.

Aeroflex operates through two principal business segments: Aeroflex Microelectronic Solutions and Aeroflex Test Solutions.

Aeroflex Microelectronic Solutions ("Microelectronic Solutions")4

Microelectronic Solutions offers a broad range of microelectronics products and is a leading provider of high-performance, high reliability specialty products (including radiation-hardened or "RadHard" products) for the commercial wireless communications, space, avionics, defence, medical and other industries.

Microelectronic Solutions is headquartered in Plainview, New York. It operates 11 primary manufacturing facilities and has a workforce of approximately 1,600 employees. Revenue for the year ended 30 June 2013 was $360.8m (approximately 57 per cent of total Aeroflex revenue). Microelectronic Solutions operates through three key business lines:

· Hi-Rel Microelectronics - microelectronics and semiconductors for space, medical, aerospace and defence

A leading provider of high reliability standard and custom integrated circuits and circuit cards that are designed to operate in harsh environments, processing analogue and digital signals to enable personal and machine communications. Primary sectors include space, medical, aerospace and defence. It accounted for approximately 54 per cent of Microelectronic Solutions revenue in the year ended 30 June 2013.

· RF & Microwave ("RFMW") - microwave and radio frequency products for wireless, space, aerospace and defence

A leading provider of specialised passive and active microwave components, semiconductor modules and integrated microwave assemblies, used in a range of signal emitting devices such as radar systems and wireless testing devices. Its primary sectors include wireless, defence, avionics, and space. This business accounted for approximately 39 per cent of Microelectronic Solutions revenue in the year ended 30 June 2013.

· Motion Controls - motion enhancing products for space, defence and energy

A leading provider of a range of integrated motion control solutions including slip rings, DC motors, gimbals, actuators and controllers. Typical applications include military turrets, fire control systems, missile guidance systems, radar pedestals and inertial navigation systems. It accounted for approximately 7 per cent of Microelectronic Solutions revenue in the year ended 30 June 2013.

Aeroflex Test Solutions ("Test Solutions")4

Test Solutions is a leading provider of a broad line of specialised test and measurement hardware and software products, primarily for commercial wireless communications and space, avionics and defence applications.

Test Solutions operates two primary manufacturing facilities and has a workforce of approximately 1,000 employees. Revenue for the year ended 30 June 2013 was $270.6m (approximately 43 per cent of total Aeroflex revenue).

Test Solutions operates through two key business lines:

· Wireless (Stevenage, UK) - wireless infrastructure and handset testing

A leading provider of specialised mobile and wireless test equipment used to develop and test wireless base stations. Test Solutions has leading capabilities in the main 4G standard, Long Term Evolution ("LTE") and the subsequent protocol Long Term Evolution Advanced ("LTE(A)"). It accounted for approximately 57 per cent of Test Solutions revenue in the year ended 30 June 2013.

· AvComm (Wichita, Kansas) - aircraft avionics and mobile radio testing

A leading provider of military radio and private mobile radio ("PMR") test equipment used by radio manufacturers, military, police, fire, and emergency response units to test handheld radios; avionics test equipment used in the design, manufacture and maintenance of electronics systems for aircraft; synthetic test equipment used to test satellites and transmit/receive modules prior to launch and deployment; and general purpose test equipment, including spectrum analysers and signal generators. It accounted for approximately 43 per cent of Test Solutions revenue in the year ended 30 June 2013.

Aeroflex Financial Information

Reported revenue and loss before tax from the audited US GAAP Consolidated Financial Statements for the year ended 30 June 2013 were $647.1m and $115.3m respectively. Adjustments from figures in the audited US GAAP Consolidated Financial Statements for the years ended 30 June 2012 and 2013 to those presented in the table above are set out in Sources and Bases of Calculation at Appendix 1 to this announcement (see notes 6, 7 and 8 in particular).

Following a number of years of revenue growth, Aeroflex has more recently experienced challenging conditions, in part due to a delay in the roll-out of the 4G wireless protocol, as well as the effects of the recession in Europe and constrained US Government spending.

In response to this, Aeroflex has implemented an internal business restructuring, primarily within the Test Solutions AvComm and Wireless businesses, to adjust its cost base and it has refocused its wireless strategy towards infrastructure testing. Throughout this period it has made significant and targeted investments in its product pipeline, to position itself to realise potentially substantial benefits from the strong growth anticipated in key commercial applications.

Aeroflex is also successfully leveraging its leading edge radiation-hardened technology into new and exciting commercial applications, such as medical, mining and oil and gas. It is increasing the value of its content on satellites, in part due to the development of smaller and lighter products, affording its customers the potential for significant operational benefits. In addition, its wireless testing business is operating in encouraging conditions, particularly in the Asia-Pacific region, with the expected roll-out of 5G (or LTE(A)) technology. Longer term trends in this area are underpinned by demand for wireless infrastructure which is, in turn, driven by the increasing number and proliferation of personal mobile devices and by increasing machine-to-machine communications.

The business is performing in line with financial market expectations, as evidenced in Aeroflex's most recent earnings results announced on 7 May 2014, with adjusted EBITDA up 13.0 per cent for the three months to 31 March 2014 versus the equivalent prior year period, and up 2.5 per cent for the nine months to 31 March 2014 versus the equivalent prior year period. Aeroflex is well positioned to deliver a strong fourth quarter in the year ending 30 June 2014, consistent with the seasonal trading pattern seen in previous years.

Market consensus estimates for Aeroflex are for a year-on-year increase in revenue of approximately three per cent in calendar year 2014 and for an increase of approximately five per cent in the second half of the calendar year.

Background to and Reasons for the Acquisition of Aeroflex

Acquisition of Aeroflex meets Cobham's strategic growth objectives

Cobham specialises in meeting the growing demand for data, connectivity and bandwidth across commercial, defence and security markets. Offering a technically diverse and innovative range of technologies and services to solve challenging problems in harsh environments, the Group protects lives and livelihoods, responding to customer needs with agility.

The Group's strategy is to leverage its innovative technology, know-how and understanding of customer requirements to build and maintain leading positions in the second and third tiers of the global defence/security and commercial aerospace, marine and land segments. Cobham identifies adjacent areas where its technology and know-how can be leveraged to meet the needs of new segments and customers to secure sustainable, long term positions and additional growth. In addition, it acquires businesses that are complementary to, and reinforces, its differentiated technology and know-how. It has a rigorous and disciplined approach to acquisition investment with a focus on increasing its exposure to growing commercial segments, which will help it bring more balance to its portfolio.

In this context, recent acquisitions have seen Cobham develop leading positions in the satellite communications ("SATCOM"), wireless and cellular segments through the acquisitions of Thrane & Thrane in 2012 and Axell Wireless in 2013.

Cobham's objective is to grow its global positions as well as to deliver sustainable top and bottom line growth, relative to the sectors in which it operates, while consistently generating good free cash flow. In this way it creates value for Cobham shareholders. Cobham aims to achieve this strategy by creating and growing a balanced portfolio of businesses that:

· Offers technically differentiated products and services that are critical, complex and often bespoke;

· Provides exposure to higher growth connectivity segments;

· Provides a business platform from which to develop new and differentiated products and applications that meet customer needs;

· Supports sustainable top and bottom line growth, with good free cash flow characteristics;

· Provides the opportunity for significant value creation through growth and business combination benefits.

The Board believes that the acquisition of Aeroflex meets all of these objectives and provides a compelling strategic fit with Cobham by virtue of its strong technology and commercial business orientation, diversified sales mix and business exposure, highly skilled workforce and geographical footprint in the UK and US.

Aeroflex possesses complementary capabilities and characteristics to Cobham

Aeroflex's business platform is complementary to and has characteristics aligned with Cobham's existing businesses:

· Long life cycle products: develops products collaboratively with clients over multi-year product life cycles;

· Attractive technology: serves key segments in commercial space and avionics, defence and medical;

· Substantial investments in PV: enables new product development, often bringing operational benefits to customers;

· High degree of customer retention and strong positions: is on priority US space and defence programmes with approximately 80 per cent of revenue derived from sole source or primary supplier contracts;

· Technically demanding components and products: enables connectivity across a spectrum of customer applications in critical and harsh environments;

· Strong underlying operating margins and cash flow generation, all comparable to the broader Cobham Group: generates gross profit margins of approximately 50 per cent and an adjusted EBITDA margin of approximately 20 per cent with comparable operating cash conversion to Cobham.

Aeroflex has complementary products, capabilities and customers in its Microelectronic Systems business

· Active and passive microwave products;

· Motion control products, including slip rings and pedestals;

· Combination of component and subsystem expertise;

· Complementary government and commercial customers and sales channels.

Aeroflex enhances Cobham's exposure to attractive commercial sectors through its strong industry positions and it strengthens key customer relationships in existing segments

· Commercial space;

· Commercial wireless infrastructure;

· Commercial aviation;

· Other commercial segments including medical, airport security and surveillance;

· In addition, a number of important aerospace and defence companies are key customers to both businesses, allowing the enlarged Group to better fulfil the requirements of these customers.

The principal business sectors in which Aeroflex operates provide further access to higher growth, ancillary opportunities and customers:

· The commercial satellite industry is set for long-term growth as the installed base requires replacement and upgrading, requirements for bandwidth increase being on a long term growth trend, and satellite service operators look to develop coverage across new geographies such as the Middle East and Africa;

· Strong demand from consumers for mobile data and connectivity is stimulating higher investment by wireless operators in upgraded infrastructure standards including the current build-out of 4G and the evolution of 5G;

· Stability of Aeroflex's positions on key, high-profile US space and defence programmes that remain relatively insulated from US Government budgetary pressure.

Aeroflex's revenue is approximately 70 per cent commercial and 30 per cent defence/government and the acquisition of Aeroflex would result in Cobham's connectivity portfolio increasing from 60 per cent to a pro forma 67 per cent of the enlarged Group's revenue, with commercial content increasing from 35 per cent to 41 per cent.

Aeroflex is expected to further underpin Cobham's growth profile

Aeroflex has strong growth prospects. These will be enhanced by Cobham's solid financial position and proven commercial capabilities. Cobham has innovative technology and know-how supported by leading positions in attractive segments. As a result, the Cobham Board continues to anticipate that Cobham can deliver mid-single digit organic revenue growth from 2015.  The acquisition of Aeroflex represents a significant development in this strategic growth objective, driven by its strong potential for growth, in part from its recent product innovations, which include:

· Development of new highly specialised electronics products for commercial/civil and military satellites;

· Expansion of its commercial products portfolio to include applications in higher growth medical and industrial segments;

· Development of wireless test capabilities to address the accelerating global build-out of 4G infrastructure and the evolution of 5G;

· Increased outsourcing by OEMs of the manufacture of electronics products;

· Opportunities for future selective acquisitions in fragmented sectors.

Aeroflex's exposure to higher growth commercial segments and its revenue growth potential is therefore consistent with Cobham's growth targets.

Acquisition of Aeroflex is expected to deliver highly attractive financial returns

Aeroflex is currently structured as a holding company with a loosely integrated business portfolio, in a similar manner to Cobham's configuration prior to the implementation of its EiD programme. The Directors believe that annual synergies from cost savings and operational efficiency improvements of approximately $85m (£50m) can be extracted, from a total investment of approximately $215m (£128m), with the majority of the programme expected to be implemented in the first three years of ownership2. These synergies will be derived from a focused integration programme, including facility consolidation, headcount reductions, operational efficiency improvements and other scale opportunities across Aeroflex and the wider combined Group, by leveraging Cobham's EiD expertise.

The cost savings will be delivered through a carefully planned "EiD-like" integration programme, with the lead integration executive reporting to Cobham's Chief Executive Officer. The integration team will comprise a mixture of Cobham and Aeroflex management.

In the medium term, the Board also believes there will be the potential for additional revenue benefits to be derived from cross-selling the complementary capabilities of Cobham and Aeroflex to their respective customers with opportunities to increase shipset values on major programmes.

Cobham has enhanced its knowledge of Aeroflex by undertaking detailed due diligence over the last three months. This has included visits to all of Aeroflex's primary operating sites in the US and UK, as well as having access to senior line management from across the company. With the benefit of the knowledge obtained during this process, Cobham has assembled a comprehensive plan to integrate Aeroflex, which will be initiated upon completion of the transaction. The plan anticipates the alignment of the Microelectronic Solutions business under Cobham's US Defence Electronics Sector, which will be renamed the Advanced Electronic Solutions Sector, to reflect the significant exposure to commercial activities that this Sector will now enjoy. The Testing Solutions segment will be aligned under Cobham's Communications and Connectivity Sector.

Summary of the Key Terms of the Acquisition

Key Terms

On 19 May 2014, Cobham and Army Acquisition Corp. (a wholly owned subsidiary of Cobham) entered into a conditional merger agreement (the "Merger Agreement"), pursuant to which, on completion of the Acquisition, such subsidiary will merge into Aeroflex, with Aeroflex continuing its existence as the surviving company. Upon completion of the Acquisition, Aeroflex will become a wholly owned subsidiary of Cobham Holdings Inc.

Under the terms of the Merger Agreement, Aeroflex Shareholders will receive consideration of $10.50 per Aeroflex share in cash following completion. This consideration values the total issued and outstanding shares of common stock of Aeroflex and the total outstanding restricted stock units and performance restricted stock units at approximately $920m (£548m) and represents an enterprise value of $1,460m (£869m) based on Aeroflex's net debt of $540m (£321m) at 31 March 2014.

Conditions

Completion of the Acquisition is conditional, inter alia, on the following:

· Cobham shareholder approval;

· Aeroflex shareholder approval;

· Customary regulatory review processes, including CFIUS, the expiration or early termination of the statutory waiting period under the HSR Act, and any filings or notifications required under comparable merger control laws;

· No "material adverse effect" in Aeroflex since the date of the Merger Agreement;

· Other customary conditions.

Cobham and Aeroflex have agreed, subject to the other terms of the Merger Agreement, to cooperate with each other and use their reasonable best efforts to do all things reasonably necessary, proper or advisable to complete the Acquisition as soon as reasonably practicable. There can be no assurance as to the timing of the necessary regulatory and government approvals or that approvals will not be subject to conditions and undertakings.

Aeroflex Shareholder Support Arrangements

Concurrent with execution of the Merger Agreement, certain affiliates of Veritas Capital, Golden Gate Private Equity and GS Direct LLC have, entered into a Support Agreement, pursuant to which, subject to the terms of the Support Agreement, they have agreed to cause VGG Holding LLC, the entity through which such affiliates beneficially own shares in Aeroflex, to vote its shares in favour of adopting the Merger Agreement at the Aeroflex Shareholder meeting called for such purpose. In the aggregate such shares represent approximately 76.3 per cent of the voting share capital.

By way of the Merger Agreement, Aeroflex has undertaken to file with the US Securities and Exchange Commission (SEC) a preliminary proxy solicitation statement relating to the Aeroflex Shareholder meeting as promptly as practicable. Aeroflex has also undertaken to mail the approved proxy solicitation statement to its shareholders promptly after receiving SEC clearance and to convene the relevant Aeroflex meeting as promptly as reasonably practicable after mailing the proxy solicitation statement.

Under Delaware law, Aeroflex shareholders who properly perfect their rights may seek appraisal of the fair value of their shares. If the Delaware courts determine that the fair value of each share is materially greater than the consideration contemplated in the Acquisition ($10.50 per share), it could have a material adverse effect on the financial condition and results of operations of the enlarged Group.

Non-Solicitation

The Merger Agreement prohibits Aeroflex from soliciting competing proposals and from providing information and engaging in discussions with third parties, except in specified circumstances. Before Aeroflex's Board withdraws its recommendation in favor of the Acquisition or Aeroflex enters into a definitive agreement for a superior proposal, Aeroflex is required to notify Cobham and give Cobham the opportunity to negotiate the terms and conditions of the Merger Agreement.

Termination Fees

Termination fees will be payable by the parties in certain circumstances. Among other circumstances, Aeroflex will pay a fee of $32m if the Merger Agreement is terminated because Aeroflex has entered into a definitive agreement for a superior proposal or Aeroflex's Board has withdrawn its recommendation in favor of the Acquisition. Cobham will pay a fee of $20m if the Merger Agreement is terminated because Cobham's Board has withdrawn its recommendation in favour of the Acquisition.

In addition, Cobham will pay a fee of $5m if the Merger Agreement is terminated because Cobham's shareholders have failed to approve the Acquisition, and Aeroflex will reimburse Cobham's expenses up to $5m in corresponding circumstances.

Financing

Cobham proposes to finance the Acquisition, which includes the refinancing of existing debt facilities of Aeroflex, through bank facilities and the proceeds of an equity placing.

Cobham has agreed a $1,300m senior unsecured bridge loan facility (the "Facility") from Bank of America Merrill Lynch International Limited and The Royal Bank of Scotland plc (collectively, the "Lenders"). The Facility will be made available to Cobham (the "Borrower") following the satisfaction of certain conditions precedent for the purpose of partially financing Cobham's payment obligations under the Merger Agreement and repayment of certain financial indebtedness of Aeroflex and its subsidiaries. As a result, up to the full amount of the Facility is expected to be funded to complete the acquisition.

The Facility has an original maturity date of 20 May 2015, with the Borrower having the option to extend up to the full amount of the Facility twice, each for a period of six months. The Facility can be repaid prior to maturity. The Facility shall bear interest at the rate of LIBOR plus a margin. All interest and fees payable by the Borrower to the Lenders under the Facility will be payable in US Dollars.

The Facility contains provisions requiring mandatory prepayment from disposal proceeds and the proceeds of new financings subject to certain carve-outs, with the terms and conditions otherwise being substantially similar to Cobham's existing $360m revolving credit facility dated 11 October 2011 and amended on 3 September 2012 and 6 June 2013.

Cobham intends to undertake an equity placing with a view to maintaining the balance sheet gearing at a level consistent with its prudent target. The Placing represents up to approximately 6 per cent of Cobham's current issued share capital.

Dividend Policy of the Enlarged Group

Cobham has a long standing progressive dividend policy, with the full year dividend being increased by 10 per cent per annum over a number of years. The Board anticipates that the proposed acquisition of Aeroflex will result in significant underlying earnings accretion and enhanced cash generation for the enlarged Group3. Consequently, Cobham intends to continue this policy, including an increase of 10 per cent in the Group's full year dividend for 2014, subject to there being no significant change to underlying market conditions for the enlarged Group.

Current Trading and Future Prospects

Cobham

On 24 April 2014, Cobham announced its interim management statement outlining its trading performance in the first three months of the year, which it stated had been in line with the Board's expectations.

Since that date, the Group's trading performance continues to be in line with the Board's expectations and, consistent with the Group's current trading performance, Cobham continues to plan for organic revenue to decline by low-to-mid single digits in 2014. It will continue to take further actions as appropriate to substantially mitigate the impact of this organic decline.

Cobham has innovative technology and know-how supported by leading positions in attractive end markets. As a result, the Board continues to anticipate that Cobham can deliver mid-single digit organic revenue growth from 2015.

Management and Employees

Cobham attaches great importance to the skills and experience of the operational management and employees of Aeroflex, who are expected to contribute to the success of the enlarged Group. Cobham anticipates that following completion of the acquisition, engagement of key members of the Aeroflex management team will be essential to the successful integration of Aeroflex into Cobham ownership.

Financial Effects of the Acquisition

The Acquisition is expected to complete late in the third calendar quarter 2014 and will be significantly accretive to Cobham's underlying earnings per share in 2015 and, assuming completion towards the end of 2014, to have a broadly neutral impact on underlying earnings in the current year. Expected returns will beat Cobham's cost of capital in the third full year of ownership3. Cobham expects the ratio of Net Debt/EBITDA of the enlarged Group at closing to be approximately 2.5x, with a target Net Debt/EBITDA ratio for the year ending 2015 of approximately 2.1x.

The estimated financial benefits set out above are contingent on the Acquisition and could not be achieved independently. Such estimated financial benefits reflect both the beneficial elements and relevant costs.

General Meeting

As a result of its size, the Acquisition constitutes a Class 1 transaction for the purposes of the Listing Rules and is therefore conditional upon the approval of Cobham Shareholders. A General Meeting will be convened in due course. The purpose of the General Meeting is to consider and, if thought fit, pass the Resolution to approve the Acquisition.

Recommendation

The Board of Directors of Cobham believes the Acquisition and the Resolution to be in the best interests of Cobham and the Cobham Shareholders as a whole. Accordingly, the Board of Directors of Cobham intends to recommend that Cobham Shareholders vote in favour of the Resolution to be put to the General Meeting as they intend to do (or seek to procure to be done) in respect of their own beneficial holdings of 150,027 Cobham Ordinary Shares in aggregate, representing approximately 0.014 per cent of the existing issued ordinary share capital of Cobham.

Mark Ronald, who is a Non-executive Director of Cobham and Aeroflex, has recused himself from any participation in the decision-making process leading to this conditional agreement.

Further Information

Further details in relation to the Acquisition will be set out in the Shareholder Circular which is expected to be published in June 2014. Cobham Shareholders' attention is drawn, in particular, to the risk factors which will be described in detail in the Shareholder Circular.

-Ends-

Enquiries

Merrill Lynch International ("BofA Merrill Lynch"), a subsidiary of Bank of America Corporation, is acting exclusively for Cobham in connection with the Acquisition and for no one else and will not be responsible to anyone other than Cobham for providing the protections afforded to its clients or for providing advice in relation to the Acquisition.

Citigroup Global Markets Inc. ("Citi") is acting as financial adviser to Cobham, and is acting exclusively for Cobham in connection with the Acquisition and for no one else and will not be responsible to anyone other than Cobham for providing the protections afforded to its clients or for providing advice in relation to the Acquisition.

UBS Limited, which is authorised by the Prudential Regulation Authority in the United Kingdom and regulated in the United Kingdom by the Prudential Regulation Authority and by the Financial Conduct Authority, is acting exclusively as joint Corporate Broker for Cobham and for no one else in connection with the placing referred to in this document and is not, and will not be, responsible to anyone other than Cobham for providing the protections afforded to clients of UBS Limited, nor for providing advice in connection with the placing described in this document.

Disclaimer

This announcement and the information contained in it is not for publication, release or distribution, in whole or in part, directly or indirectly, in or into the United States, Australia, Canada, Japan or South Africa or any other state or jurisdiction in which publication, release or distribution would be unlawful. This announcement is for information purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy, acquire or subscribe for shares in the capital of Cobham plc (the "Company") in the United States, Australia, Canada, Japan or South Africa or any other state or jurisdiction in which such offer or solicitation is not authorised or to any person who whom it is unlawful to make such offer or solicitation. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions.

The shares to be issued by the Company under the Placing (the "Placing Shares") have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold or transferred, directly or indirectly, within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The Placing Shares are being offered and sold outside the United States in accordance with Regulation S under the Securities Act. No public offering of the shares referred to in this announcement is being made in the United States, United Kingdom or elsewhere.

Members of the public are not eligible to take part in the Placing. This announcement (including the appendix) is directed only at persons whose ordinary activities involve them in acquiring, holding, managing and disposing of investments (as principal or agent) for the purposes of their business and who have professional experience in matters relating to investments and are: (a) if in a member state of the European Economic Area (the EEA), persons who are qualified investors ("qualified investors") as defined in section 86(7) of the financial services and markets act 2000, as amended (the FSMA), being persons falling within the meaning of article 2.1(e) of directive 2003/71/ec, as amended, including by the 2010 pd amending directive (directive 2010/73/eu), to the extent implemented in the relevant member state (the prospectus directive); and (b) if in the United Kingdom, persons who fall within article 19(5) of the Financial Services and Markets Act 2000 (financial promotion) order 2005, as amended (the order), or are persons who fall within article 49(2)(a) to (d) ("high net worth companies, unincorporated associations, etc") of the order, and (c) persons who have been invited to participate in the placing by the joint bookrunners (as defined below) (all such persons together being referred to as relevant persons). This announcement must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this announcement relates is available only to relevant persons and will be engaged in only with relevant persons.

This announcement has been issued by, and is the sole responsibility of, the Company. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by BofA Merrill Lynch, UBS Limited or by any of their respective affiliates or agents as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

BofA Merrill Lynch and UBS Limited, which are each authorised in the UK by the Prudential Regulation Authority and regulated in the UK by the Financial Conduct Authority and the Prudential Regulation Authority, are acting exclusively for the Company and for no one else in connection with the Acquisition, the Placing, the content of this announcement and other matters described in this announcement. BofA Merrill Lynch and UBS Limited will not regard any other person as their client in relation to the Acquisition, the Placing, the content of this announcement and other matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice to any other person in relation to the Acquisition, the Placing the content of this announcement or any other matters described in this announcement. Apart from the responsibilities and liabilities, if any, which may be imposed of BofA Merrill Lynch and UBS Limited by the Financial Services and Markets Act 2000 or by the regulatory regime established under it, BofA Merrill Lynch, UBS Limited nor any of their respective affiliates accepts any responsibility whatsoever for the contents of the information contained in this announcement or for any other statement made or purported to be made by or on behalf of BofA Merrill Lynch, UBS Limited or any of their respective affiliates in connection with the Company, the Acquisition, the Placing Shares or the Placing. BofA Merrill Lynch, UBS Limited and each of their respective affiliates accordingly disclaims all and any liability, whether arising in tort, contract or otherwise (save as referred to above) in respect of any statements or other information contained in this announcement and no representation or warranty, express or implied, is made by BofA Merrill Lynch, UBS Limited or any of their respective affiliates as to the accuracy, completeness or sufficiency of the information contained in this announcement.

The distribution of this announcement and the offering of the Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by the Company, BofA Merrill Lynch or UBS Limited that would permit an offering of such shares or possession or distribution of this announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this announcement comes are required by the Company, BofA Merrill Lynch and UBS Limited to inform themselves about, and to observe, such restrictions. The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange.

This announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events. These statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, the Company does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained in it. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement. No statement in this announcement is or is intended to be a profit forecast or profit estimate or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Company.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

1 Conversions of US$ figures to £ in this announcement are at an exchange rate of $1.68.

2 Statements of estimated cost savings and synergies relate to future actions and circumstance which, by their nature, involve risks, uncertainties and contingencies. As a result, the cost savings and synergies referred to may not be achieved, or those achieved could be materially different from those estimated.

3 Neither this statement nor any other statement in this announcement are intended to be a profit forecast and should not be interpreted to mean that earnings per Cobham share for the current or future financial years would necessarily match or exceed the historical published earnings per Cobham share.

4 See Appendix 1 for an explanation of the adjustments made to revenue in the US GAAP Consolidated Financial Statements for the year ended 30 June 2013 to those used as the basis for the revenue percentages presented in the following paragraphs.

5 Per the audited US GAAP Consolidated Financial Statements for the years ended 30 June 2012 and 2013 and unaudited US GAAP Consolidated Financial Statements for the nine months ended 31 March 2014, adjusted for certain non-cash, non-recurring and other items. Financial information for the years ended 30 June 2012 and 2013 has also been adjusted forthe disposal of the ATES business in September 2013. See Sources of Information and Bases of Calculation at Appendix 1 for details (see notes 6, 7 and 8 in particular).

6 Per the audited US GAAP Consolidated Financial Statements for the years ended 30 June 2012 and 2013 and unaudited US GAAP Consolidated Financial Statements for the nine months ended 31 March 2014.

APPENDIX 1

Sources of Information and Bases of Calculation

1. Conversion of $ figures to £ in this announcement are at an exchange rate of $1.68.

2. Aeroflex enterprise value of approximately $1,460m (£869m) is based on consideration of $10.50 per Aeroflex share, total issued and outstanding shares of common stock of Aeroflex and total outstanding restricted stock units and performance restricted stock units of approximately 87.66m, and Aeroflex net debt of $540m (£321m) as at 31 March 2014.

3. The ratio of enterprise value to estimated adjusted EBITDA of 10.5x implied by the acquisition of Aeroflex is calculated with reference to the enterprise value of Aeroflex of $1,460m (as set out above) and market consensus estimates for adjusted EBITDA for the year ended 31 December 2014 of $139.0m per Bloomberg as at 19 May 2014.

4. Unless otherwise stated, financial information of Aeroflex in this announcement has been extracted, without material adjustment, except for the disposal of the ATES business in September 2013 (as described below), from the audited and unaudited historical financial information of Aeroflex contained in company filings.

5. Statements regarding revenue splits have been calculated using Cobham's revenue for the year ended 31 December 2013 of £1,789.7m and Aeroflex's revenue for the year ended 30 June 2013 of $631.4m, adjusted to exclude the ATES business sold by Aeroflex in September 2013 (as described below).

6. Reported income/(loss) before tax for Aeroflex was $(58.5)m and $(115.3)m per the audited US GAAP Consolidated Financial Statements for the years ended 30 June 2012 and 2013 respectively, and $2.5m per the unaudited US GAAP Consolidated Financial Statements for the nine months ended 31 March 2014. Adjusted operating income, as extracted from Aeroflex company filings, is calculated by adding back interest expense and net other expenses ($36.0m, $42.3m and $22.2m respectively) and adding back/(deducting) certain non-cash, non-recurring and other items including:

· Amortisation of acquired intangibles ($62.7m, $56.5m and $25.0m respectively);

· Impairment of goodwill and other long-lived assets ($56.7m, $95.5m and $nil respectively);

· Restructuring charges ($6.8m, $5.5m and $3.6m respectively);

· Share based compensation ($3.5m, $3.6m and $3.6m respectively);

· Loss on extinguishment of debt and deferred financing costs ($1.2m, $2.6m and $nil respectively);

· ITAR settlement expense ($nil, $8.0m and $nil respectively);

· Other one-off items partly related to business acquisitions and divestitures ($(7.3)m, $5.1m and $1.8m respectively).

7. Adjusted EBITDA, as extracted from Aeroflex company filings, is calculated as adjusted operating income for the years ended 30 June 2012 and 2013 and for the nine months ended 31 March 2014 (as described above), adjusted to add back/(deduct) certain non-cash, non-recurring and other items including:

· Depreciation and other amortisation ($21.6m, $23.2m and $18.2m respectively);

· Pro forma savings from restructuring ($8.0m, $2.9m and $1.9m respectively);

· Other one-off items primarily related to business acquisitions and divestitures ($0.8m, $(0.2)m and $(0.3)m respectively).

8. Aeroflex financial information for years ended 30 June 2012 and 2013 has been adjusted to exclude ATES, which was disposed of in September 2013. These adjustments have been made on the basis of unaudited Aeroflex financial records for the years ended 30 June 2012 and 2013, as set out below:

· Reported revenue of $673.0m and $647.1m adjusted to deduct $15.1m and $15.7m respectively;

· Adjusted operating income of $101.1m and $103.8m adjusted to add back/(deduct) $2.1m and $(0.1)m respectively;

· Adjusted EBITDA of $131.5m and $129.7m adjusted to add back/(deduct) $(1.8)m and $(2.9)m.