Melrose stresses commitment to GKN ahead of crucial takeover vote

The turnaround specialist's comments follow an exchange of letters with Business Secretary Greg Clark, whose calls for "binding" agreements over its proposals for GKN sparked a raft of assurances from Melrose a day earlier, including plans to keep the firm listed and headquartered in the UK.

"Melrose fully stands behind its plan to work for the improvement of not only GKN, but the UK economy as well," the company said in its latest comment today.

Melrose said its "constructive discussions" with the government minister and the exchange of letters demonstrated a commitment to GKN "that its current board sadly lacks".

"Melrose has offered a legally binding commitment to the Secretary of State to stand behind its intention to hold the GKN Aerospace business as it delivers the improvement necessary to unlock its potential," the company added.

It is the latest salvo in a tit-for-tat battle over Melrose's £8.1 billion hostile takeover bid ahead of the shareholder vote.

GKN investors have until 1pm tomorrow to cast their ballots on the controversial deal.

GKN has a site in Telford where it employs 350 as well as other factories in the Midlands with around 1,000 workers.

Five-year commitment

Melrose said earlier this week that it was ready to make a five-year commitment to the business, having agreed with the Takeover Panel to maintain its UK listing and headquarters and ensure that a majority of its directors are resident in the UK.

It would also make sure that the Aerospace and Driveline divisions retain the rights to the GKN name and maintain GKN's current level of research and development investments.

That was alongside a pledge to guarantee it would not sell the Aerospace Division before April 2023.

Melrose's letter responded to a number of Mr Clark's concerns, having also called for GKN to continue as a UK taxpayer, pay suppliers promptly, make arrangements for current and future pensioners, and investment in the training and development of the workforce.

He also stressed that a short-term approach would not be in the best interests of defence and national security, adding that he would like Melrose to rule out a short-term sale of the business barring Government consent.

GKN responded to the exchange of letters by highlighting risks the business would face under Melrose ownership, including uncertainty of its Driveline business which did not receive any commitments that were otherwise granted to the Aerospace division.

"In other words, the future of GKN Driveline becomes immediately uncertain under Melrose's ownership in contrast to its certain future under the Dana/GKN Driveline combination."

Shortcomings

That was on top of what it said were shortcomings over Melrose's pensions proposals that would lead to higher debts and gross pension liabilities of £4.3 billion "which would be borne by shareholders and subject to significant volatility."

GKN chief Anne Stevens said: "The fact that Melrose appears to have been forced into these undertakings shows once again that it would be an unsuitable owner of GKN.

"Melrose is asking shareholders to consider a set of last-minute undertakings which leave considerable uncertainty and do not adequately address the need for long-term shareholder value creation.

"If this is how Melrose behaves when it is bidding for GKN, how can it be trusted if it gets its hands on the wheel? The Melrose offer remains the low-value, high-risk option for shareholders."

Meanwhile, senior MPs have rounded on the Business Secretary for leaving it too late to get assurances from Melrose over its controversial bid for GKN.

Shadow business secretary Rebecca Long-Bailey and leading Labour backbencher Rachel Reeves told Mr Clark he should been quicker in demanding information from turnaround specialist Melrose.

The Commons also heard that Melrose's letter to Mr Clark did not go far enough to allay concerns over the proposed takeover of the UK engineering giant.

It came as Mr Clark reiterated to MPs his calls for Melrose to set out more clearly its intentions for GKN.

Responding to his statement, Ms Long-Bailey criticised the Business Secretary for waiting until the "last minute" to get assurances from Melrose, as she said concerns about the plans had been raised for months.

The Business Secretary said the Ministry of Defence would look to require a legally binding commitment relating to the management of any defence contracts in the event of a successful bid.

He added it was "right" that Melrose should address the "wider issues of public concern" before the bid closes formally.