Block £7bn takeover of fighter plane engineer
As GKN is targeted by predatory City rival, ministers are urged...
A PREDATORY turnaround group has targeted one of Britain’s leading engineering firms, prompting calls for ministers to intervene.
GKN, which dates back to the 18th century, has rejected an unsolicited £7bn approach from Melrose, slamming it as opportunistic and cheap.
It prompted the engineer to reveal plans to split its aerospace and cars divisions, as well as appointing interim chief Anne Stevens as full-time boss, which saw her become the FTSE 100’s eighth female chief executive.
But Melrose is expected to push ahead with its interest despite opposition from the GKN board ahead of a deadline for a formal bid on February 9.
GKN employs 9,000 in the UK and makes parts for fighter jets, including the F-35, as well as Audi and BMW cars, Airbus planes, the Boeing 737 and Black Hawk helicopters.
Sir Vince Cable, the Lib Dem leader and ex-business secretary, said its takeover was a serious threat to UK industry. He has written to Greg Clark, the Business Secretary, urging him to use whatever powers has to intervene.
Cable said: ‘GKN is a massively important company – it’s a leading British Tier 1 supplier to the car industry and it operates on long-term horizons.
‘GKN stands for long-term investment in advanced manufacturing, whereas Melrose are in the business of short-term financial engineering. It’s utterly and completely unsuitable for this industry.’
Tony Burke, the Unite union’s assistant general secretary for manufacturing, said: ‘If the bid isn’t stopped it could lead to one of the UK’s oldest engineering firms being asset stripped, with sites and divisions across the country being sold. Unite will be working with all interested parties in halting this destructive predatory bid.’
GKN started life as the Dowlais Iron Co in Merthyr Tydfil, South Wales, in 1795. It supplied cannonballs to the British Army during the Napoleonic Wars.
The company is worth £5.7bn on the stock market but investors have become increasingly unhappy about missed profit and cash flow targets, with some calling for it to split apart its aero and car divisions.
Shares slumped around 10pc in October after it said profit would be only slightly above the £678m it made in 2016, below expectations of around £735m.
Incoming chief executive Kevin Cummings stepped down at the same time, with the company warning that the US aerospace division he headed would have to write-off up to £130m after a review of accounts.
Stevens, 69, who is credited with helping turn around car maker Ford’s businesses in the US and Mexico, confirmed that GKN is planning to separate its automotive and aerospace divisions.
Melrose, which has a stock market value of around £4.2bn, believes management have been underperforming at GKN and can do better. The proposed share- and-cash offer made on January 8 valued GKN at 405p ($5.48) per share, a 24pc premium to the closing price the day before.
Melrose specialises in buying engineering firms, revamping them and selling them on at a profit. It bought German utility maker Elster in August 2012 for about £1.8bn before selling it to US firm Honeywell for £3.3bn. The firm also bought Loughborough-based manufacturer FKI in July 2008 before splitting it up and selling it in parts.
Cable added: ‘In extremis the Government could acquire a minority stake in GKN to deter a hostile takeover. That is an extreme step and I would hope it would not come to that.’
A Melrose spokesman said: ‘We believe there would be significant operational and commercial benefits arising from Melrose’s ownership of GKN businesses, reversing a history of GKN not delivering on margin targets.’
The Department of Business said that it was monitoring the situation, but added: ‘This is a commercial matter for the parties involved.’