Minister’s surrender over GKN
He’s accused of paving way for vultures to buy British defence giant
ASSURANCES secured by ministers over the hostile takeover of GKN are ‘not worth the paper they’re written on’, critics said last night.
Just 48 hours before shareholders decide the future of the British engineering giant, Business Secretary Greg Clark finally broke his silence.
He said he had received assurances from Melrose, which is mounting the £8.1billion takeover, about the future of the 259-year-old firm, particularly its aerospace division.
And he effectively cleared the way for the deal, telling MPs he was unlikely to intervene over concerns about national security before shareholders vote.
But MPs lined up to condemn the supposed guarantees, warning they may not be legally enforceable or stop Melrose from breaking GKN up and selling it off. They said his last-ditch intervention had generated little more than ‘warm words’ and had come too late to influence shareholders, many of whom will have already voted.
Critics also pointed out the promises would allow Melrose to sell off parts of GKN to the highest bidder after five years, jeopardising the long-term future of the firm, which makes parts for the Eurofighter Typhoon and US-UK fighter jets.
The Government has intervened 12 times in takeovers since the Enterprise Act 2002 was created. Seven were on national security grounds, including in 2005 when US defence giant Lockheed Martin bought military communication firm Insys.
The row erupted after Melrose made an 11th-hour bid to persuade wavering shareholders to back the deal yesterday.
Melrose snaps up underperforming firms and sells them on at a profit, often within three to five years, raising concerns that GKN will be broken up and flogged off around the world. Concern for UK industry was heightened after major GKN customer Airbus said it would find it ‘practically impossible’ to give GKN work under short-term owners.
Mr Clark sent Melrose a letter in which he laid out his concerns over long- term investment in GKN – particularly in light of the firm’s state defence work.
‘I am concerned that a shortterm approach to ownership may not be compatible with maintaining the longer-term relationships which characterise the best interests of the defence field,’ he said. ‘I would expect to see a commitment to continuity of ownership and strategic investment specific to the defence-related business of GKN and to exclude the option of a short-term sale of this business without the consent of the Government.’
In response, Melrose yesterday issued a series of promises insisting it would not sell the aerospace arm of GKN before April 2023. But this commitment did not make the formal undertakings agreed with the Takeover Panel watchdog. As such, it may not be considered legally binding. Melrose also said it would keep its own headquarters in the UK, keep its shares on the London Stock Exchange and protect the GKN name for five years. No binding promises were made on the UK workforce or maintaining GKN’s headquarers in Redditch, Worcestershire.
After receiving these ‘guarantees’, Mr Clark gave a statement to MPs saying he would take advice on whether to intervene on national security grounds after shareholders have voted, paving the way for the deal to be approved. However, the Mail understands that Defence Secretary Gavin Williamson remains ‘unconvinced’ by the national security aspect of the deal.
Last month he raised ‘serious concerns’ about a ‘lack of clarity’ about what would happen to the military side of the business. And in Parliament, MPs on both sides of the house raged at the failure to protect the firm.
Labour MP Jack Dromey said: ‘Warm words conceal
the reality that GKN would become history if Melrose takes over. The guarantees are not worth the paper they are written on.’
The pledges were ‘simply not good enough for Redditch’ warned the constituency’s Tory MP, Rachel Maclean.
‘There is no clarity about the headquarters being in Redditch and it would be a really sad day if we lost them. There are still major question marks hanging over this deal.’
Addressing Mr Clark, Labour’s Rachel Reeves, chairman of the business, energy and industrial strategy committee, demanded to know why he hadn’t intervened sooner.
Pointing out the takeover had been looming for two-anda-half months, she said: ‘Why did it take three days before shareholders have to vote on this bid for you to write to shareholders to get those assurances, which are frankly pretty limited ... it’s too late for you to drive a harder bargain.’
Labour MP Adrian Bailey added: ‘ The Melrose commitment not to sell GKN aerospace division before 2023 falls well short of the investment cycles of 20-40 years that are needed in the aerospace industry.’
Steve Turner, assistant general secretary of the Unite union, which represents GKN workers, said: ‘It is doubtful that even these limited assurances are worth much more than the paper they’re written on, or are actually legally enforceable by either the Government or the takeover panel. No deal should be struck on the basis of false promises.’
Melrose has repeatedly said it invests in businesses as if it will own them for ever.
In his letter, chief executive Simon Peckham said: ‘We are totally transparent. We are here because under the management of its current board, GKN has underperformed. We believe we are the right team to return this ailing business to ... a British engineering and manufacturing powerhouse.’