Tycoon behind bid to break up engineering giant defends bonus pot of up to £285m

ONE of the tycoons in line to share £285million if they get their hands on GKN was yesterday forced to defend their actions.

After a firestorm of criticism at the threat to the leading British engineering firm, Simon Peckham said they would only divide up the vast sum if they met tough expansion targets.

Mr Peckham, chief executive of predator Melrose, said: ‘Some think we buy GKN and get handed a £285million cheque. It. Is. Not. True.’

His counter-attack came after a huge backlash against Melrose’s hostile £8.1billion takeover bid for GKN, the UK’s biggest and most bitter such battle in a decade.

There are now only ten days to decide the fate of GKN, which employs around 58,000 people around the world, including 6,000 in the UK.

The bid has been rejected by GKN’s board as cheap and opportunistic, while Melrose’s strategy of selling firms on within three to five years has raised widespread concerns.

Last week MPs from all parties called on ministers to block Melrose’s bid. They lined up alongside the Daily Mail’s campaign to save GKN and highlighted the defence giant’s critical importance to UK industry.

Melrose’s bid was dealt a major blow last week when GKN’s biggest customer, Airbus, said it would be ‘practically’ impossible to give GKN more work if it was bought out by Melrose because the short-term approach of Melrose was not suited to the aviation sector.

And four major shareholders are now publicly backing GKN. The Government is considering whether it should intervene, given 259-year-old GKN’s work on the US-UK joint strike fighter F-35 and Eurofighter Typhoon.

Details of the £285million incentive scheme are revealed in company documents as the investment firm tries to convince shareholders to vote for the takeover. Yesterday Mr Peckham, 55, hit back at criticism over the scheme in an interview with The Sunday Telegraph.

To earn that amount Melrose would have to ‘do the same of amount of value creation in two years as GKN has done in 250 years – we’d have to add £6billion’. Mr Peckham said he will gain ‘nothing’ from the GKN takeover until its market value has increased by £1billion.

He is sensitive to the charge that Melrose is simply a ‘turnaround’ firm that buys and sells companies. ‘While we might not own a company forever, while we do own it we treat it as if we were going to own it forever,’ he said.

Mr Peckham, David Roper, 67, and Christopher Miller, 66, founded Melrose and then listed it on the stock market in 2003. They were joined in 2005 by finance director Geoffrey Martin, 50. They all own large stakes in the firm.

Under a bonus scheme agreed last year, the top four directors will be awarded shares based on how much Melrose is worth as a company.

Analysts believe they are aiming to add £5.6billion to the value of the investment firm after the deal, putting them in line for £285million. Melrose, which is worth £4billion, has itself talked about creating a firm worth £10billion.

Support for GKN’s fight against the Melrose takeover has grown, with two more major shareholders speaking out against the bid.

Pelham Capital and Sanderson Asset Management, which are among the 20 shareholders with the biggest stakes in GKN, both said Melrose’s offer undervalues the engineering firm.

Jupiter Asset Management and Lancaster Investment Management went on the record late last week with their backing for GKN.

One shareholder, Aviva Investors, has said publicly that it is backing Melrose. The bid deadline is on March 29.