GKN takeover cleared after MoD secures undertakings
Business Secretary Greg Clark has cleared Melrose’s £8.1bn takeover of GKN, refusing to block it on the grounds of national security.
Melrose narrowly secured sufficient shareholder approval to buy the engineering giant before the March 29 deadline.
During the bid phase, which was one of the fiercest in recent City memory, opponents of Melrose’s bid claimed both that it would weaken national security and that the company would lose work because it would be unable to provide assurances to partners about its long-term ownership.
Clark took advice from the Ministry of Defence, with the department agreeing undertakings from Melrose.
Speaking in the House of Commons, Clark said: “The evidence presented to me was that this was a British company taking over another British company, that no such takeover has ever been blocked on national security grounds, and that the Ministry of Defence and the other agencies said there was no reason for intervention on those grounds.”
GKN is a 250-year-old global engineering business headquartered in Redditch which employs around one-tenth of its 60,000 staff in the UK. However it is seen as having a critical role to play because of its defence contracts and importance to the supply chain.
The undertakings given to the MoD include that the Government must provide its consent before the disposal of the business, or parts of it, that the MoD “considers to have national security implications”.
Melrose must also inform the Government in advance of any plans to sell a business or assets which are involved in national security and to give it “early visibility” of any prospective purchasers.
Clark had already secured some commitments from Melrose in the days before the bid deadline which requires Melrose to not sell the aerospace business for at least five years without the Government’s consent and to maintain current spending levels on research and development for the next five financial years.
Given Melrose’s commitments, some of which are enforceable under contempt of court laws, Clark decided “there are not reasonable and proportionate grounds to make a statutory intervention on the grounds of national security”.
Melrose has also agreed to meet with the Department for Business, Energy and Industrial Strategy every six months to provide updates on its ownership of GKN.
