Government puts GKN takeover under review

The two main protagonists in the battle to take control of engineering giant GKN will confront each other today amidst mounting concerns that any takeover could seriously impact the business’ pension scheme.

Turnaround specialist Melrose has bid £7.4bn for the Redditch-based group, a figure which GKN says woefully undervalues the company.

Anne Stevens, chief executive of GKN, together with group finance director, Jos Sclater, will be presenting evidence on the possible takeover of the business to the Business, Energy and Industrial Strategy select committee.

They will be followed by testament from Melrose trio Christopher Miller, co-founder and executive chairman, David Roper, co-founder and executive vice-chairman and Simon Peckham, co-founder and chief executive.

Alcester-based Melrose has said GKN has seen a trend of under-performance which it believes can be transformed by splitting off the two most successful divisions of the company, Driveline (automotive) and Aerospace.

GKN, which has recommended shareholders to take no action on the bid, has fast-tracked its own strategy, dubbed Project Boost, which has also recommended making Driveline and Aerospace two companies.

It has also emerged that GKN is in talks regarding the possible sale of the Driveline operation to US-based Dana.

In a bid to undermine the Melrose bid, it has claimed the takeover would see the company take on a large amount of debt which could jeopardise the future of the pension scheme as well as other aspects of the GKN business.

The Pensions Regulator too has expressed concerns. It is worried that any takeover by Melrose could weaken GKN’s fulfilment of its pension obligations.

Ahead of today’s hearing, Rachel Reeves, chair of the BEIS committee, said: “GKN is an important company for the UK and globally. Hostile takeovers attempts of major UK companies do not happen very often.

“There are serious matters at stake not only for the future of GKN and of highly-skilled jobs at the company but also for the UK’s engineering, science and research base. It also puts into focus our industrial strategy and the objectives of boosting productivity, growing companies and ensuring long-term investment in industries of strategic importance.”

West Midlands Mayor, Andy Street last week wrote to Business Secretary Greg Clark asking him to consider whether the Government should intervene and halt the takeover process because of GKN’s strategic importance to the West Midlands economy.

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