GKN’s TAKEOVER BID

ALL TOO OFTEN it is price which determines the outcome of mergers and takeovers. Share registers are now global and, once the proverbial train has departed, City traders and hedge fund managers hitch calculated risks and profit handsomely.

Notwithstanding, there have been several bid approaches where robust industrial and strategic- defence policies have prevailed. Examples include the proposed Airbus deal with BAE Systems, the Pfizer skirmish with Astrazeneca, the Deutsche Boerse ‘merger of equals’ with the London Stock Exchange, and the approach for Unilever by Kraft-Heinz. The key to shooting down these transactions were robust company boards, and strict regulatory and political responses.

The House of Commons business select committee may be up to its neck picking over the carcass of Carillion, but it would be a dereliction of duty if it now allowed GKN, Britain’s only world-class car components manufacturer, to fall into the hands of financially driven Melrose which has little of the same commitment to British research and development and manufacturing.

The country cannot allow manufacturing know-how to vanish into uncertain hands at the very moment when Britain is looking to new global markets post-Brexit. At least the defence select committee is preparing to ask some serious questions about aerospace.

GKN may not be a top Ministry of Defence contractor, but it does important work on the Typhoon fighter jet and is a strategic partner with the US (including work on the Lockheed Martin F-35 joint-strike fighter destined for Britain’s new aircraft carriers).

In the civilian sector, Airbus regards GKN as a vital supplier for wing components, to the point that the company’s chief executive, Tom Enders, says he would not favour GKN falling into the hands of a financially driven and predatory bidder.

Aerospace, along with pharmaceuticals, finance and high-tech, is a sector of the UK economy where there are industrial clusters and genuine competitive advantage. Allowing that to be whipped away would be enormously detrimental.

The biggest concern about a Melrose takeover is for GKN’s driveline (driveshaft) technology and its advanced work in Abingdon on e-drive, a vital component for next generation electric cars already embraced by manufacturers including Volvo.

The UK car components industry was greatly denuded by the experiences of the late 20th century, but, as the industry has risen phoenix-like from the ashes, GKN emerged as a world-class player willing to invest in the new drive technologies.

It would be an act of industrial sabotage if Melrose were to get its hands on driveline and e-drive and sell the technology to the highest bidders in France, Germany or China. We only have to look at the recent takeover by Vauxhall by Peugeot owners PSA and the threat to the Ellesmere Port plant to understand how ruinous that would be. The Unite union recognises this, and so does an industrialist of the stature of Sir Richard Lapthorne.

The business select committee has a sacred duty to properly scrutinise what the impact of a hostile Melrose deal would be. Allowing the future of GKN to be settled by global investors, with no loyalties to British technology and jobs, would be unconscionable.