DON’T LET VULTURES DESTROY A BRITISH COLOSSUS
As hedge funds bid to make a killing from sale of firm that made Spitfires
MPs and business chiefs last night blasted ‘corporate vultures’ trying to cash in on a hostile takeover of GKN. Investors aim to make millions by forcing through the sale of one of Britain’s oldest engineering giants.
The firms from Mayfair and New York have been building large stakes in GKN to take advantage if it is bought by predator Melrose. As many as a quarter of GKN’s shares are now thought to be owned by at least five hedge funds – aggressive speculators which seek to profit from deals.
It means the future of the 259year-old firm, which made Spitfires in the Second World War, could now rest in the hands of a band of ruthless investors with no long-term interest in the company. A crucial shareholder vote on
‘Short-term profits but long-term disaster’
whether the takeover should go ahead – due by the end of Thursday – now balances on a knife edge. One of the key players is feared US fund elliott, infamous for pursuing profit at all costs. It stands to make up to £16.5million from the deal.
GKn, which made cannon balls for the Army in the Battle of Waterloo, is based in Redditch, Worcestershire, and employs 60,000 staff globally.
Critics fear Melrose will sell it piece-by-piece to foreign buyers if its £8.1billion bid succeeds, putting UK jobs and national security at risk.
Last night Tory MP Robert halfon said: ‘This is robber baron capitalism at its worst – many British jobs being destroyed by the few, corporate vultures plundering a company for short-term profits but long-term disaster.’ GKn boss Anne Stevens slammed hedge funds at the weekend, saying: ‘They could not give a c**p.’ It came as it emerged that:
At least five hedge funds which own GKn stock are also betting Melrose’s share price will fall after the takeover goes through – meaning they will make even more money from the deal;
The funds have been buying into GKn using complex financial trading products which mean they pay less tax;
Melrose bosses were accused of encouraging long-term shareholders to sell up, giving vulture speculators a chance to cash in.
Melrose must get the backing of just over 50 per cent of shareholders by Thursday afternoon if it is to take over control of GKn.
But British rules mean that investors can vote even if they bought their shares just days earlier. This allows speculators to snap up stock and vote at the last moment.
This not only gives them substantial sway over the vote, but means they can make millions in a very short period if the deal goes through.
Liberal Democrat leader Sir Vince Cable, a former business secretary, said: ‘This short-term speculation is damaging and totally contrary to the longterm perspective necessary.’ Sir John Parker, a top industrialist and chairman of mining firm Anglo American until last year, added: ‘If short-term shareholders want to go to the gambling table ... that’s one thing, but they shouldn’t be able to influence the outcome.’
Melrose boss Simon Peckham – who stands to share a £285million bonus if the deal goes through – has been criticised for apparently encouraging the feeding frenzy.
When the bid was announced in January, GKn shares rose and he seemed to encourage other investors to get out with a profit. This effectively opened the door for opportunistic hedge funds.
Mr Peckham said at the time that GKn shareholders can ‘elect to sell in the market right now for a substantial premium to Friday’s opening price or they can choose to combine their business with ours’.
Opponents of the takeover leapt on his remarks last night. Labour MP Jack Dromey, whose constituency includes a GKn plant, said Melrose was ‘putting at risk the British national interest and a British icon for shortterm financial gain’.
Unlike funds used by most ordinary investors, hedge funds can gamble that a firm’s stock price will fall – known as ‘shorting’.
One of the best-known hedge funds to spot this opportunity was elliott, a new York-based firm run by billionaire Paul Singer and his son Gordon.
It already had a 1.7 per cent stake in GKn, but as doubt about the takeover swirled, the hedge fund increased this to 3.85 per cent, making it the second-largest shareholder.
It also took a 1.74 per cent short position in Melrose. It claims that its behaviour makes firms more effective.
Worse still, like many hedge funds, elliott has invested in GKn using complex financial products called derivatives.
This means that it gets the shares’ voting rights and can make a profit without having to own any stock or put any real money into the business. It also won’t have to pay stamp duty on the shares when it sells up.
elliott, Melrose and GKn declined to comment.
THREE days before the fate of GKN is decided, the Mail couldn’t be clearer on what a disaster the hostile takeover of this engineering giant would be for Britain.
If it falls prey to the Melrose vultures, the firm which built Spitfires in WWII will be broken up and sold off for a fat profit – in all likelihood to foreign predators. With its biggest customer threatening to pull out, the fate of GKN’s 60,000 staff – and their pensions – would hang in the balance.
Meanwhile the directors of the ruthless corporate raider behind the takeover will pocket hundreds of millions between them, and the hedge funds – glorified gamblers – backing the deal will see their cynical short-termism handsomely rewarded.
This paper dearly hopes that long-term investors, who see a great future in GKN’s cutting-edge technology, will win the day. But if, on Thursday, the decision goes the wrong way, Business Secretary Greg Clark – who has been notably silent on the matter to date – will face a clear choice.
Does he intervene to protect the workers and management at a company which is vital to our defence and crucial to our postBrexit future? Or does he side with the rapacious greed of both the asset strippers from Melrose, and the Mayfair and US hedge funds, and nod the deal through?
Before the election, ministers pledged to protect British companies in key industries. Failing to uphold those promises would hand a victory to casino capitalism – and to Jeremy Corbyn.