GKN fights back in takeover battle

Melrose would destroy us, says engineer’s boss

THE boss of GKN last night warned that a takeover by predator Melrose would destroy the British engineering giant as the battle for control of the company intensified.

GKN, which supplied cannonballs to the British Army in the Battle of Waterloo and now makes parts for fighter jets and military helicopters, is fighting off an unwanted £7.4bn from the turnaround specialists.

Speaking to the Mail, GKN chief executive Anne Stevens declared: ‘They absolutely would destroy this company and I just feel so passionately I don’t want to give them a chance.’

The comments came as 259-year-old GKN, which also makes parts for commercial aircraft and cars, warned that Melrose was ‘more focused on financial engineering than real engineering’.

Pressure was last night mounting on ministers to block the proposed takeover amid concerns over Melrose’s plans to break up the crucial defence supplier and sell it piecemeal all over the world.

But the comments sparked a furious response from Melrose, claiming that GKN could only flourish with a ‘change of control, new leadership and fresh thinking’.

Melrose specialises in buying firms cheaply and selling them on at a profit three to five years later.

As such, Melrose’s potential ownership has sparked major concerns for UK industry, and fears about national security in the UK and the US.

Setting out the GKN defence strategy yesterday in a letter to shareholders, chairman and veteran industrialist Mike Turner said: ‘The Melrose offer is not a good deal – it is low-price and high-risk.

‘Melrose’s management team lacks relevant experience and its short-term business model is inappropriate for GKN.

‘Your board believes that Melrose is more focused on financial engineering than real engineering. A short-term private equity style strategy is not the right way to provide sustained shareholder value.’

Victory for Melrose would mark the biggest hostile takeover in the UK for a decade, and cast doubt over the future of 58,000 employees around the world including 6,000 in the UK. Tom Enders, the boss of plane maker Airbus, a key customer of GKN and major UK employer, warned, in response to questions about GKN, that his company could not afford any supplier to take its foot off the pedal.

And one major car maker is understood to have said Melrose’s ownership may affect GKN’s position as a partner on electric cars.

GKN plans to return £2.5bn to shareholders partly through selling its powder metallurgy business.

Addressing fears that the money should be put into the business instead, finance chief Jos Sclater said: ‘We’d love to, but we have got to win a takeover battle otherwise we are not going to be around.’

Stevens said the powder metallurgy was already a leader in its field. She said: ‘We felt we had delivered value and it was time to return it to the shareholders.’

Melrose has a strategy of ‘ buy, improve, sell’, and says GKN underperforms and can do better.

Christopher Miller, Melrose chairman, has announced plans to ‘declutter’ GKN, slash head office staff and speed up decisions.

It said: ‘Melrose’s view [is] that the fundamental transformation in culture and approach needed to improve GKN is only possible with a change of control, new leadership and fresh thinking.

‘Melrose notes that, in defining itself, GKN continues its fixation with sales performance at the expense of profit and cash.’