Could American security fears be key to blocking GKN takeover?
AMERICAN officials could step in to block the sale of British defence titan GKN to ‘asset- stripper’ Melrose on national security grounds.
The deal is being examined in the US because the 259-year-old firm makes equipment for American Chinook and Blackhawk helicopters and F-35 fighter jets.
The Committee on Foreign Investment in the United States (CFIUS) – an American government body which can block deals anywhere in the world if they could harm the nation’s military – is looking at the takeover and concerns have been raised in the US Congress.
Turnaround specialist Melrose’s £8.1billion bid narrowly won the support of Redditch-based GKN’s shareholders last week. It is expected to break up the defence firm and sell its divisions piecemeal to the highest bidders for a profit.
Foreign buyers are thought likely to show an interest – particularly Chinese companies, which are always looking for defence and technology firms.
If US officials fear that parts of the company may end up in Chinese hands, they could seek to halt the acquisition.
Steve Turner, of the Unite union, said: ‘The takeover is far from a done deal. National security concerns remain not just for the UK, but for the US too, where the Committee on Foreign Investment in the United States is yet to approve the takeover and to whom Unite has made representations.’
GKN staff are holding crisis talks tomorrow to discuss how to respond to the takeover.
Melrose last month cancelled a self-imposed deadline to get the support of the CFIUS in a sign that the process will not be a simple rubber stamp.
The company initially made its takeover conditional on winning backing from the US committee by April 19. But it has now said it will forge ahead even if approval has not been secured by that date because a deal can be thrashed out afterwards. Chaired by US Treasury Secretary Steve Mnuchin, CFIUS has blocked three attempted takeovers of US firms by the Chinese in the past three years alone. By contrast, the UK’s Business Secretary Greg Clark has powers to stop a takeover under the Enterprise Act but never has.
Since the act was created in 2002, British politicians have intervened in just seven deals on national security grounds, and have always stopped short of blocking them. Labour MP Jack Dromey, whose Birmingham Erdington constituency includes a GKN factory, said: ‘It’s shameful that thousands of British jobs should now depend upon what the American government decides to do.’
US Congressman Neal Dunn wrote to CFIUS in February, claiming Melrose’s lack of a defence background creates risks. Melrose – whose four bosses stand to split a £285million bonus if the deal leads to bumper profits – has already launched an offensive to try to charm the Americans.
Chairman Christopher Miller, 66, and chief executive Simon Peckham, 55, went to the Pentagon for talks with senior officials. And in a grilling by MPs in March, the pair insisted they will not jeopardise British security. Mr Peckham said: ‘We live in this country.
‘My family live in this country. We are not going to sell GKN military assets to anyone who isn’t an appropriate buyer. Even if we were free to do it, we wouldn’t do it.’
Melrose declined to comment last night. When it scrapped the deadline for CFIUS approval, the firm said constructive talks were being held with US officials.