Melrose’s greed is far too high a price

Melrose has come back to the table with a better and final offer for engineering champion GKN which it says represents a 43pc premium.

In spite of scepticism towards Melrose’s myopic approach, its hostile bid demonstrates how undervalued GKN had become on the FTse 100 in spite of leading edge technology in motor cars and aerospace.

The revised bid is worth £8.1bn, or 467p per share, against the 500p value per share which GKN’s management aims to deliver.

Melrose has done shareholders a huge favour by recognising some serious mispricing. It is impossible to be entirely happy with GKN’s escape route, which involves a white-knight merger of its automotive arm with Us drive-shaft maker Dana. This potentially could shift production from redditch in the UK to ohio in the Us.

GKN, with its valuable driveline and edrive technology, was the last quoted company standing in the UK motor industry.

Melrose has proved very good at delivering quick returns with other deals. But the biggest beneficiaries have been Melrose proprietors, guided by former Hanson accountant Chris Miller.

As GKN chairman Mike Turner points out, the 11 Melrose directors have received the same in performance incentives as the company’s entire spend on research and development over the last five years.

In hard numbers, Melrose bosses have collected £458m-plus in pay and bonuses in recent years and would stand to gain a further £285m if break-up plans for GKN are successful. That is almost three-quarter of a billion pounds, most of which could have gone to pension funds and been shared with employees or invested in Britain’s future.

By voting with Melrose, investor Aviva has betrayed those who trust the big pensions group and insurer – with £377bn of funds under its control – to do the right thing.

It is the accumulation of personal wealth at the expense of other stakeholders which makes the Melrose offer so toxic.

Britain has long been a great exemplar of free market, Anglo-saxon capitalism and long may it remain so. But there can be no prizes for abusing the system by allowing Melrose bosses to enrich themselves at the expense of other stakeholders.

The Melrose model places financial engineering above genuine engineering. If approved Melrose can only do damage to the efforts of governance mavens to create a more sharing capitalism.

It would be shameful if the long-term investors were to follow Aviva and allow Melrose to trample over the broader good.

Power play

WHeN the Beast from the east left Britain short of gas supplies just a fortnight ago, it provided a sharp remainder as to how dependent the UK is on the kindness of continental strangers for energy security.

Now British consumers find themselves at the mercy of a carve up of assets between Germany’s two energy behemoths, rWe and eon.

Under the £38bn deal, rWe will focus on power generation, including the renewables owned by ailing Innogy, and eon will largely become a distribution enterprise.

once again the UK finds itself powerless. Innogy owns Npower, one of our big six energy groups. It has been planning to merge its operations with sse, creating a UK-listed company with 11.5m customers.

If all that happens, the big six could become the big four reducing the competition among energy groups in Britain. It will not be the first time that decisions taken in Germany have messed with UK energy.

After the Fukushima disaster in Japan in 2011, Angela Merkel decreed that Germany wanted nothing to do with nuclear any longer. rWe and eon almost immediately reneged on promises to invest in new nuclear in the UK.

Clearly the UK authorities will scrutinise the impact of the reshaped industry on consumers and may lodge objections with the european Commission.

But when Britain allows its vital infrastructure to be sold to overseas buyers it becomes a policy taker rather than giver.

Deep fried

AMerICA knows how to look after its strategic interests. The Committee on Foreign Investment in the United states (CFIUs) has shown singapore-based Broadcom a yellow card following its £84bn bid for American chipmaker Qualcomm. Broadcom is trying to circumvent scrutiny by shifting domicile to America.

But CFIUs says the ploy won’t work and threatens to hand the matter over to President Trump. Yikes.