GKN to pump £150m into pension pot

Engineer steps up fight against hostile takeover

GKN is preparing to plug a black hole in its pension scheme as it battles a £7.4bn hostile takeover attempt from turnaround firm Melrose.

the engineering giant, which makes car and aircraft parts, has already announced plans to hand £2.5bn to shareholders if it wins its fight for independence.

But GKN last night told the Mail it will look after the pension fund first. the scheme, which includes the nest eggs of 32,000 workers, has a deficit of £700m.

experts said they expect the engineer to put in a one-off lump sum of at least £150m. that is the amount Melrose has said it will contribute to the pension fund if it wins control of GKN in a battle that will trigger a fees bonanza in the City.

the pension deficit has become key in the takeover battle following outrage over the collapse last month of infrastructure group Carillion with a £587m black hole in its retirement scheme.

Responding to Melrose’s earlier pledge to pay into the pension fund, GKN’s finance chief Jos Sclater said some of the money raised from the sale of its powder metallurgy division would be used to support the retirement scheme.

the 44-year-old said: ‘ We obviously have a duty to both our shareholders and the other stakeholders, including the pension scheme.

‘So I do expect that some of the sale proceeds will go into the pension scheme before anything is distributed to shareholders.

‘Given the deficit that we have, selling a division then putting some of it into the pension scheme and giving the rest back to shareholders is actually a very sensible way of making sure the pension scheme is better funded.’ last year GKN paid a lump sum of £250m into the scheme, on top of a £42m annual contribution to plug the black hole. GKN’s clients include the US and UK military, Mercedes and Boeing. It employs around 58,000 worldwide, with 6,000 in the UK. GKn bosses have slammed the Melrose offer as opportunistic and cheap. the pension scheme was hurled to the forefront of the takeover battle after trustees last month warned Melrose it would have to address the deficit. at the time, Melrose said it ‘builds businesses to long-term health and prosperity and has an impeccable pension track record’.

But Unite, which is opposed to the takeover, last night said: ‘Melrose’s promise to put millions into the pension fund must be viewed with caution as this will be paid for through borrowing and job losses.’

the pensions tussle comes amid growing political interest in the takeover. the Government is under growing pressure to intervene, with Prime Minister theresa May signalling she will act if it is in the national interest.

Unite assistant general secretary for manufacturing tony Burke said: ‘to stop this Melrose juggernaut crashing through one of the UK’s oldest engineering companies, we will need the Government to get off the fence and act.’