Proactive Investors - Run By Investors For Investors

GKN tells lawmakers it has received many approaches since Melrose hostile bid

GKN and Melrose bosses were grilled by the parliament’s business committee on Tuesday
GKN has told shareholders to vote against the proposed deal

GKN PLC (LON:GKN) told MPs on Tuesday that it has received many approaches from other companies since Melrose Industries PLC’s (LON:MRO) took its bid to buy the engineer hostile.

Speaking to lawmakers at a parliamentary hearing, GKN chief executive Anne Stevens said the company has held talks with other interested parties.

Melrose, which specialises in turning around struggling industrial companies, offered £7.4bn for GKN in January but the engineer has recommended shareholders vote against the deal because it believes it undervalues the firm.

READ: GKN in talks to sell Driveline to Dana as it continues to fend off hostile bid from Melrose

Bosses of the two companies were grilled by the parliament’s business committee on Tuesday amid concerns about the proposed deal.  

Worries about the deal include the prospect of GKN being broken up and sold to international companies, the possibility that its debt pile could rise and the risk of being unable to fund its pension scheme.

Melrose chief executive Simon Peckham told lawmakers that the company would not sell GKN’s protected military assets to anyone who is not an appropriate buyer.

The group will also look at what binding commitments it could make about research and development at GKN if it the takeover goes ahead, he said. 

Proposed takeover should be blocked, say MPs

Ahead of the parliamentary hearing, a group of 16 MPs urged business secretary Greg Clark to block the proposed deal.

In a letter to Clark, the MPs wrote: "We are writing to you because we all have a GKN plant and/or supply chain-affected firm in our constituencies. Due to this, we have shared our concerns about the proposed hostile takeover bid by Melrose and want to express to you why we believe the takeover should not succeed."

They asked Clark to intervene in order to prevent the company from being "dismembered", saying it was highly likely Melrose would break up GKN into pieces before selling it off.

The letter was led by Labour MP Jack Dromey and Conservative MP Rachel Maclean.

Concerns about GKN's pension scheme

Earlier, the Work and Pensions Select Committee published a letter from the Pensions Regulator expressing concern that a takeover could impact GKN’s ability to fund its pension scheme, which trustees say has a £1.1bn deficit.

The Committee called on Melrose to submit its proposed acquisition to the regulator for approval to show the security of the retirement scheme.

“Melrose claims an impeccable record in protecting pension rights. The surest way to demonstrate its commitment in this case would be to apply voluntarily for clearance,” Frank Field, chair of the Committee, said in a statement.

Unite Union has also called for the deal to be halted. The union has argued that Melrose has a track record for asset stripping.

“They take over businesses, they break businesses up, they compartmentalise them and then flog them off to the highest bidder in order to maximise shareholder value. That's the nature of the business," said Steve Turner, assistant general secretary at Unite.

View full GKN profile View Profile

GKN Timeline

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use