Melrose proposes binding GKN undertakings to MPs
Melrose Industries has sought to reassure MPs about its proposed hostile takeover of GKN by proposing binding commitments on research, pensions and other matters of political concern.
The turnaround specialist said it had not viewed GKN’s books but that it intended to make binding post-offer undertakings covering the engineering company’s head office, research spending, suppliers and pensions. However, Rachel Reeves, who chairs the business committee, called for stronger commitments on investment and jobs.
Simon Peckham, Melrose’s chief executive, set out his plans in a letter to Reeves. He said if Melrose bought GKN it would keep the business based in Britain with a UK board of directors; at least match GKN’s research spending of 2.2% of sales; work with suppliers and customers to deepen relationships and strengthen British industry; maintain GKN’s apprenticeship programme; and increase contributions to GKN’s pension scheme until it is fully funded.
Melrose increased its offer for GKN on 12 March, valuing the company at £8.1bn in a final bid that was rejected by GKN. Melrose is appealing to GKN’s shareholders to accept the offer over the heads of GKN’s board, which argues it undervalues its business.
The bid battle, which started on 12 January, has become highly political. Jeremy Corbyn, the Labour leader, called Melrose an asset stripper out to make a quick buck at the expense of UK industry. Prime Minister Theresa May has said the government will monitor the bid after MPs raised security concerns about a buyout of GKN, which makes technology used in the F-35 fighter jet.
Peckham faced severe questioning from Reeves’s committee on 6 March. He told the committee Melrose would invest in research and development to restore GKN’s fortunes but MPs criticised him for making no formal commitments. Peckham said he would write to the committee setting out proposed undertakings.
Reeves said Peckham's letter gave "a sense of the likely direction" of undertakings but she said there was not enough to reassure workers about their jobs. About 6,000 of GKN’s 59,000 workers are in the UK, based at 14 sites.
He said: “Workers at GKN deserve more detail from both Melrose and the management team at GKN about what future lies in store for their jobs and for long-term investment in the UK operations of the company.”
Melrose’s other commitments included continuing to play a part in a partnership between the government and the automotive industry, including working on low carbon technology and electric vehicles. GKN’s aerospace arm will continue to play its part in UK research programmes, Melrose said.
Peckham wrote: "We hope that our intention to make undertakings and post-offer intention statements in the areas listed above gives you and the committee assurance that we mean what we say and the we are prepared to commit to meaningful action."