GKN (LON:GKN) could lose aerospace parts business from Europe’s Airbus if the engineer is taken over by turnaround specialist Melrose Industries PLC (LON:MRO).
Airbus - GKN’s biggest customer - said the takeover would make it "practically impossible" to keep working with the FTSE 100-listed engineer.
READ: GKN reviews third takeover bid from Melrose Industries
"Airbus fully supports industry development and consolidation through M&A activities,” Airbus chief operating officer Tom Williams was quoted in The Financial Times as saying.
"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 R&D budgets and limits vital innovation.”
In response, GKN chairman Mike Turner said: "The comments from Airbus that stress the need for long-term investment and strategic vision in our industry emphasise our firmly held belief that Melrose is not an appropriate owner of GKN.
"Its management lacks the relevant experience and its short-term business model is inappropriate for GKN’s customers and investors."
He added: "As we have previously stated, and as these comments from Airbus reinforce, 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 reacts
In reaction to the Airbus comments, Christopher Miller, Melrose’s chairman commented: “Melrose invests in its businesses for the long-term.”
He added: “We are certain that GKN's new strategy of hasty short-term business break up will not benefit the long term requirements of customers. In the aerospace segment we note that GKN has received approaches for that division, while at the same time contemplating a flawed sale of its Auto division to a US buyer.
“As a result, the Aerospace unit will be disproportionately burdened with gross pension liabilities, restricting potential investment and innovation.”
Miller concluded: “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.”
GKN – which makes wing components and other aircraft parts for Airbus –turned down a third and final offer from Melrose on Monday, saying it “fundamentally undervalues” the business.
The Melrose offer is to be put to shareholders for a vote, as will GKN’s plan to hive off its Driveline automotive business into a joint venture with US firm Dana Inc (NYSE:DAN) in order to focus on its aerospace business.
In early afternoon trading, GKN shares were down 1.9% at 429.2p, while FTSE 250-listed Melrose added 0.3% at 221.3p.
-- Adds Melrose comment, updates share prices --