GKN suitor says no cause for concern on pensions
The potential suitor to Midlands engineering giant GKN has moved to reassure pension trustees that there is no cause for concern in its approach.
Melrose’s current bid for the GKN group stands at £7.4bn, a figure the Redditch-based group has rejected because it claims the bid substantially undervalues the company.
GKN yesterday told the trustees of its pension fund that the move by Melrose could have a potentially damaging effect on pension arrangements by claiming the level of debt being proposed by Melrose was higher than the GKN leverage as concluded at the end of June last year.
Melrose issued its own statement once markets had closed, claiming it was a responsible custodian of pension schemes.
It said: “Melrose notes the clarification made by the board of GKN today in relation to the GKN pension schemes. This statement contained nothing that should cause concern to GKN pensioners, as Melrose has a long track record of responsibly funding pension schemes.
“However, the board of Melrose is surprised that the clarification makes no mention of the offer by Melrose of a substantial, voluntary cash contribution of up to £150m to the GKN pension schemes made to the board of GKN in its letter on 8 January 2018.”
In its own statement yesterday, GKN said: “Melrose has stated that they expect, in the event of their offer completing, the combined group would have net leverage in line with approximately 2.5x EBITDA; a level materially higher than the company’s (GKN) leverage level of 0.6x as at 30 June 2017.
“This may have implications for the covenant strength of the company, the level of the technical provisions deficit and therefore the level of immediate and/or long term cash funding requirements.”
