CABI­NET AT WAR OVER GKN

De­fence min­is­ter has ‘se­ri­ous con­cerns’ about deal but Busi­ness Sec­re­tary still re­fuses to act

Daily Mail - - News - By Ja­son Groves and Rachel Mil­lard

A CABI­NET rift opened up last night over the fate of en­gi­neer­ing gi­ant GKN.

White­hall sources said De­fence Sec­re­tary Gavin Wil­liamson was dig­ging in over his op­po­si­tion to the firm’s sale to as­set-strip­pers Mel­rose.

The con­tro­ver­sial deal for the 259-yearold com­pany was ap­proved by a share­hold­ers’ ma­jor­ity of 52 to 48 on Thurs­day.

Busi­ness Sec­re­tary Greg Clark yes­ter­day in­di­cated he had no ob­jec­tion to the deal in prin­ci­ple, say­ing no British firm was ‘im­mune’ from takeover.

Mr Clark, who has been ac­cused of fail­ing to de­fend vi­tal British in­ter­ests, said: ‘Share­hold­ers have de­cided they want a new man­age­ment.’ But he ac­knowl­edged the £8bil­lion deal could still stall on na­tional se­cu­rity grounds.

The Busi­ness Sec­re­tary hailed ‘legally bind­ing’ guar­an­tees he ex­tracted from Mel­rose, in­clud­ing a pledge not to sell its aero­space di­vi­sion for at least five years.

But crit­ics have warned they were ‘not worth the pa­per they’re writ­ten on’.

White­hall sources last night con­firmed Mr Wil­liamson re­tained ‘se­ri­ous con­cerns’ about the deal. He told MPs last month he had ‘a whole se­ries of ques­tions’, say­ing there was ‘no clar­ity [from Mel­rose] as to what the true ap­proach will be’ over GKN’s mil­i­tary busi­ness.

He added: ‘While there is no clar­ity and no as­sur­ance, do I have con­cerns? Yes, I do.’

A White­hall source said Mr Wil­liamson’s con­cerns ‘still stand’ de­spite the pledges se­cured by Mr Clark, adding: ‘I think it’s fair to say that it’s only Gavin’s re­sis­tance that has stopped this deal just be­ing nod­ded through.’

As anger over the deal mounted yes­ter­day, it emerged that:

Labour has upped the pres­sure on Mr Clark to in­ter­vene;

Hun­dreds of jobs at GKN could be axed within weeks – with par­tic­u­lar fears for the 260 work­ers at the GKN head of­fice in Red­ditch, Worces­ter­shire;

Bankers, spin doc­tors and lawyers on both sides of the deal are set to rake in more than £220mil­lion – in­clud­ing up to £140mil­lion for ad­vis­ers to Mel­rose.

Mr Wil­liamson’s ob­jec­tions cen­tre on GKN’s de­fence oper­a­tion, which pro­duces com­po­nents for mil­i­tary equip­ment in­clud­ing F35 jets and Ty­phoon air­craft.

He told MPs: ‘I have very se­ri­ous con­cerns about the pro­posed takeover. It is not that I am against changes in the in­dus­try, but what I and the depart­ment want is re­as­sur­ance about the fu­ture of the mil­i­tary side of the busi­ness.’

Labour leader Jeremy Cor­byn said the deal ‘must be stopped’, call­ing for Mr Clark to ‘step in and act in the na­tional in­ter­est, in­stead of serv­ing the in­ter­ests of City spec­u­la­tors’.

The party’s busi­ness spokesman Re­becca Long-Bai­ley wrote to Mr Clark, urg­ing him to ‘ex­er­cise your pow­ers now and pre­vent the takeover from hap­pen­ing as a mat­ter of ur­gency to safe­guard the na­tional in­ter­est’.

She said the com­mit­ments from Mel­rose were ‘in­ad­e­quate’, adding: ‘The his­tory of GKN has been in­ter­twined with our own in­dus­trial and mil­i­tary his­tory.

‘The firm man­u­fac­tured can­non­balls dur­ing the Napoleonic wars and tanks for the D-Day land­ings. The takeover puts at risk the firm and its proud her­itage. It not only en­dan­gers our na­tional de­fence but our in­dus­trial strat­egy too.’

Lib Dem leader Sir Vince Ca­ble called for re­form of the takeover rules, in­clud­ing the in­tro­duc­tion of ‘ad­di­tional tests’ to pro­tect na­tional in­ter­ests.

Sir Vince also called for re­forms to pre­vent spec­u­la­tors snap­ping up shares at the last minute to vote through a con­tro­ver­sial takeover. With GKN, hedge funds are thought to have bought 25 per cent of the firm’s shares in re­cent weeks.

Labour MP Rachel Reeves, chair­man of the Com­mons busi­ness com­mit­tee, said: ‘Greg Clark could and should have in­ter­vened ear­lier to get more com­pre­hen­sive un­der­tak­ings to pro­tect our vi­tal in­ter­ests. He is still await­ing ad­vice on the na­tional se­cu­rity im­pli­ca­tions of this deal and he must not hes­i­tate to act if con­cerns are raised – this is not nec­es­sar­ily over yet.’

Mr Clark dis­missed calls for re­form, say­ing stud­ies – in­clud­ing one or­dered by ex-busi­ness sec­re­tary Sir Vince – had found ‘dif­fi­culty in mak­ing a dis­tinc­tion be­tween classes of vot­ers’.

He added: ‘Those share­hold­ers who bought very re­cently bought from other share­hold­ers who, in ef­fect, chose not to back the ex­ist­ing man­age­ment.’ Af­ter for­mer deputy PM Lord He­sel­tine said ‘no other coun­try of our sort would have al­lowed this’, Mr Clark claimed that was ‘not right’ and British takeover pro­ce­dures were ‘very sim­i­lar’ to those in Ger­many and France.

Un­der com­pe­ti­tion laws based on EU reg­u­la­tions, the GKN deal can be halted only on na­tional se­cu­rity grounds. Mr Clark has told MPs he will have four months to as­sess the sit­u­a­tion.

Sources said the Min­istry of De­fence would be asked to set out any na­tional se­cu­rity con­cerns. If se­ri­ous con­cerns were raised then min­is­ters would try to ne­go­ti­ate fur­ther ‘legally bind­ing’ guar­an­tees with Mel­rose.

If they could not be se­cured, Mr Clark would be able to re­fer the deal to the Com­pe­ti­tion and Mar­kets Author­ity, which could lay down strin­gent con­di­tions or even block the sale al­to­gether.

Sources said the MoD’s for­mal re­sponse was likely to take ‘weeks rather than days’.

There are fears for hun­dreds of staff af­ter Mel­rose con­firmed there ‘will be job re­duc­tions’ at GKN head­quar­ters. It made no bind­ing com­mit­ments on main­tain­ing the UK work­force, de­spite Mr Clark ask­ing for as­sur­ances.

A spokesman said the firm, which has its HQ in May­fair, planned to axe head-of­fice roles that dou­bled up with its own.

Rachel Ma­clean, Tory MP for Red­ditch, said Mel­rose must re­tain GKN’s UK head­quar­ters.

Dig­ging in: Gavin Wil­liamson

Un­der pres­sure: Greg Clark

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