Pledges not worth the paper they’re written on

PLEDGE: Melrose says it is willing to make a ‘legally binding’ commitment that it will not sell GKN’s aerospace division before April 1, 2023.

REALITY: This promise was included in a letter to Business Secretary Greg Clark. But it did not make it into the formal ‘post- offer undertakings’ agreed with the Takeover Panel, the watchdog that regulates mergers and acquisitions. As such it is not legally binding.

Furthermore, Melrose says the commitment would not stop it floating the aerospace arm on the stock market – leaving it open to a takeover bid from someone else.

Melrose also says the commitment can be ditched if there is a takeover approach from ‘a suitable purchaser’ before April 2023. The commitment effectively hoists a ‘for sale’ sign over GKN’s aerospace division in April 2023 – raising the prospect of a takeover from anywhere in the world. PLEDGE: For a period of five years, Melrose will keep its headquarters in the UK and its shares listed on the stock market in London. It will also ensure the majority of its directors live in the UK. REALITY: On the face of it, these promises sound reassuring and they are legally binding – meaning the Takeover Panel could take Melrose to court if they break them. But they refer to Melrose and not to GKN. As such they are a sideshow.

After a successful takeover that would see GKN become part of Melrose, the GKN headquarters in Redditch, Worcestershire, could close, GKN’s shares will disappear and the GKN board will be sacked. PLEDGE: Melrose will ensure that spending on research and development at GKN will equal at least 2.2 per cent of GKN sales every year up to 2023. REALITY: This pledge is legally binding and is welcome. But there is nothing to say what the money will be spent on and there are no guarantees that the spending will continue after five years – raising fears over the future in an industry where projects can take a decade or longer to come to fruition. GKN says it spent 3.6 per cent of sales on R&D in 2016.

...AND WHAT WASN’T PROMISED: Melrose has made no commitment on jobs. GKN has 58,000 staff around the world including 6,000 in the UK. Nothing that Melrose or the Government said yesterday safeguards their jobs. In fact, the kind of cost-savings that Melrose is targeting could put hundreds if not thousands of GKN jobs at risk around the world.