GKN escalates war of words with Melrose over pensions

An announcement by the trustees of GKN’s pension scheme exposes “misleading statements” by the suitor of the business, the board of the engineering group has said.

The statement marks the latest development in the bitter war of words between Redditch-based GKN and turnaround specialist Melrose, which this week upped its offer for the group to £8.1bn.

Outlining the trustees’ concerns, GKN said it continued to have major misgivings concerning Melrose’s hostile takeover bid.

In particular, it said the trustees’ announcement exposed the statements made by Melrose in its revised offer announcement. In particular, GKN said the trustees had made it clear that GKN’s proposals would leave the UK pension schemes fully-funded on an IAS 19 basis.

In other words, it said the UK deficit in its Aerospace business would be entirely eliminated.

The trustees said GKN’s proposals provided appropriate mitigation to the pension schemes and that they were in the best interest of members.

“(This) demonstrates that Melrose has not kept shareholders informed about its dialogue with the trustees and that it has failed to make proposals to address the key concerns that the trustees have raised, despite this hostile takeover approach being in its 10th week,” said GKN.

It added: “Melrose, despite its assertions to the contrary, is not demonstrating a responsible approach to the serious issue of protecting the long term interests of GKN’s pensioners, and (it) underscores Melrose’s lack of credibility as a suitable custodian for GKN’s businesses”.

Anne Stevens, chief executive of GKN, said Melrose’s failure to engage effectively with the trustees on such a crucial topic as the future of the GKN pension schemes only confirmed the group’s view that Melrose, with its financial buyer model, was not an appropriate owner of GKN.

“The trustees’ statement illustrates that, unlike Melrose, GKN has properly addressed the pension issues facing the company and, as we eliminate the UK deficit, we look forward to our Aerospace business further re-rating in line with its peers,” she said.

Earlier, Melrose executive chairman Christopher Miller had said: “We are working towards an agreement on the GKN pension schemes which will strengthen them and better protect GKN’s pensioners.

“We look forward to continuing our constructive discussions with GKN’s pension trustees now they have concluded their discussions on the proposed sale of GKN Driveline to Dana.

“Melrose is an exemplary custodian of pension schemes. We have already set out that we will invest £150m in the GKN pension schemes within the first 12 months of ownership. In addition, we have committed to make annual payments to the GKN pension schemes at a level greater than that which GKN pays into the schemes today.”

Melrose has submitted the final terms of its £8.1bn offer to GKN shareholders, who now have until March 29 to decide whether or not to accept the offer.

It has said the offer – which GKN has said continues to undervalue the business – will not be increased under any circumstances.