Airbus weighs into GKN row
GKN’s biggest customer Airbus has cast doubt over its future relationship if the engineering giant is taken over by turnaround specialist Melrose Industries.
Tom Williams, chief operating officer of Airbus’s commercial aircraft division, warned it would be “practically impossible” to give any new work to GKN under the ownership model of Melrose, which acquires underperforming assets before improving them and selling them on.
Earlier this week, GKN rejected a final £8.1billion hostile takeover offer from Melrose as undervaluing the FTSE 100 business. GKN has lined up a separate deal to merge its automotive division with American auto parts group Dana and is committed to returning £2.5billion to shareholders over three years.
GKN’s aerospace business generates about a fifth of its $3.64billion annual revenue from Airbus, for which it makes wing components.
A meeting is expected to be held later this month at which Melrose would seek to reassure Airbus that its business model would not have a negative longterm impact on Airbus.
But Williams said: “Airbus fully supports industry development and consolidation through M&A activities. However, the nature of our industry is one that requires a commitment to long-term investment and strategic vision.
“The industry does not lend itself to shorter term financial investment which naturally reduces research and development budgets and limits vital innovation. It would be practically impossible for us to give any new work to GKN under such ownership model when we don’t know who will be the long term investor.”
GKN seized on the comments to reinforce its argument that Melrose is “not an appropriate owner”. GKN’s chairman, Mike Turner, said: “Winning new business in our markets would be more difficult if customers were uncertain as to the identity of their future long-term partners.”
Melrose chairman, Christopher Miller, countered: “We are certain that GKN’s new strategy of hasty short term business break up will not benefit the long term requirements of customers.
“Under Melrose, shareholders and customers will be able to enjoy a considered and longer term process of value creation, investment and business enhancement which is clearly not an option under continued GKN ownership.”