Category Archives: Defence

Britain, Business, Defence, Government, National Security

The GKN bid and threat to national security?

MELROSE

THE hostile takeover of the defence giant GKN is to be investigated by MPs amid concern that it could harm national security.

In a rare intervention in a corporate takeover, senior executives from GKN and the predatory bidder Melrose are being called before the business committee.

MPs want answers about the risk to jobs, pensions and the manufacture of key military components if the £7.4billion deal goes ahead.

It came as Defence Secretary Gavin Williamson expressed “serious concerns” about the proposed takeover.

Giving evidence to the defence select committee, Mr Williamson said he had written to Business Secretary Greg Clark about the deal, adding: “There is no clarity as to what the true approach is going to be in terms of the GKN military side of the business.

“We sometimes have to ask tough questions as to whether we should raise concerns about the break-up of large successful important businesses that have a real impact upon our national security. It would have been remiss if I didn’t do that on this occasion.”

Turnaround specialist Melrose’s bid for GKN, which employs 6,000 people in the UK and 58,000 worldwide, is facing close-scrutiny amid concerns over its potential impact.

Redditch-based GKN, which is nearly 260 years old, makes parts for fighter jets including the US-UK F-35, the Eurofighter Typhoon, and the US B-21 stealth bomber. It also produces components for aircraft and car firms including Airbus, Mercedes and Toyota.

The Government is investigating whether it could intervene on national security grounds. The business committee is to hold a hearing into the takeover on March 6.

Committee chairman Rachel Reeves said: “GKN is an important company for the UK and globally. This session will be an opportunity to hear from Unite [the union] and for GKN and Melrose to set out their case for the future of the business.”

GKN’s fate was thrown into doubt last month when Melrose tabled its offer to buy the firm, which was rejected by board members as cheap and opportunistic.

Melrose’s strategy is to sell firms on it has acquired at a profit within three to five years, raising fears that GKN will be broken up piecemeal and sold off around the world.

Melrose suffered a £28million loss last year and has presided over factory closures and hundreds of job cuts.

The firm has said it welcomes the opportunity to appear before the select committee. It also said that while it believes there are no competition or national security issues, it asserts that it will be in the national interest for Melrose to be the guardian of GKN businesses. As a British public company, it says it is fully aware of its ownership responsibilities.

GKN said it was happy to give evidence to the committee.

 

AS MPs launch an inquiry into the hostile bid for Britain’s oldest engineering company, it is a relief that Westminster has at last woken up to this grave threat to our national interest.

Anyone who believes the get-rich-quick asset strippers at Melrose are fit to take over GKN should look closely what happened to FKI, another company that fell into their clutches ten years ago.

After selling off most of the firm’s assets for a huge profit, Melrose kept control of gas turbine manufacturer Brush – which has performed weakly ever since, with the threat of job losses now hanging over it.

Earlier this week, Melrose reported a loss of £28million after writing-off £145million from Brush’s value. Can such City takeover firms, relying on loans for their acquisitions, really be trusted to takeover GKN?

For 260 years, this flagship engineering firm has been vital to our defence, making cannonballs for Waterloo and Spitfires for the Battle of Britain. To this day, it remains a world-beater in the sort of technologies we will need after Brexit, whether building parts for stealth aircraft or driveshafts for new electric cars.

True, GKN needs to improve its efficiency. But it would be madness to let it be broken up and sold to the highest bidders at home and abroad.

As leading industrialist and Government adviser Sir Richard Lapthorne puts it: “The hollowing out of Britain’s industrial base has gone too far. The Germans and French would not even dream of allowing this.”

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Britain, Business, Defence, Government

Acquisition firm seeking to takeover GKN made £28m loss in 2017

MELROSE

THE PREDATORY firm plotting to snap up British defence giant GKN suffered a £28million loss last year.

Financial results for turnaround company Melrose also showed it has presided over factory closures and hundreds of job cuts.

Its annual loss for 2017 was fuelled by problems with power generation firm Brush, which it took over and acquired a decade earlier.

The loss-making figures will add to questions about Melrose’s suitability to own GKN, a key supplier to defence and aerospace industries with more than £9billion in sales.

Melrose has made a £7.4billion offer for GKN, which has some 58,000 employees worldwide including 6,000 in the UK, and makes key parts for fighter jets, airplanes and motor vehicles.

But the bid has been rejected by the board of GKN as being “cheap and opportunistic”, triggering the biggest hostile takeover battle in a decade and calls for the UK Government to intervene.

Alex Chisholm, permanent secretary for the business department, has been quizzed about the bid by the Commons business committee.

Defence Secretary Gavin Williamson is also under pressure in answering questions from the defence committee. GKN has significant stakes in military projects and supply chains.

Melrose insists it remains well-placed to push ahead with its offer. Chairman Christopher Miller said: “Substantial long-term value is being created with significant investment in new technology, new products and operations.” The financial woes at Melrose stem from a takeover of engineering group FKI in 2008, which included buying Brush.

Melrose has also disclosed that it was writing-off £144.7million in value from this division, including £31.1million on the closure of its factory in Changshu, China. Melrose said Brush’s generator sales fell 43 per cent last year.

The results revealed that up to 270 jobs are at risk at Brush’s production factory in Loughborough. It is also closing its facility in Ridderderk, Netherlands, and shifting work to the Czech Republic.

Elsewhere, Melrose closed loss-making operations in the heating and ventilation division of Nortek, the US manufacturer it bought in 2016.

A spokesperson for Melrose said: “Brush remains a fine business which we are happy to support … The real number investors will focus on is the dramatic increase in underlying profits and the near doubling of the dividend, which reflects our confidence in the progress being made at Nortek.”

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Britain, Business, Defence, Government, National Security, Politics, United States

Defence Secretary to be quizzed by MPs over hostile bid for GKN

TAKEOVER BID OF GKN THREATENS NATIONAL SECURITY

GOVERNMENT ministers face a grilling in the House of Commons this week over the hostile £7.4billion takeover bid for engineering giant GKN.

Theresa May is under pressure to intervene amid mounting concern about the impact the buyout could have on industry and national security.

Redditch-based GKN makes parts for the F-35 Anglo-American fighter jet, the Eurofighter Typhoon and the US’s B-21 stealth bomber, as well as car parts such as driveshafts for the automotive industry.

Its future has been thrown into doubt after the City turnaround group Melrose lodged a £7.4billion offer last month. GKN’s board is attempting to fight the deal. Melrose is known for asset stripping which often leads to large numbers of people losing their jobs through restructuring.

It has emerged that the Defence Secretary Gavin Williamson is set to be questioned about the bid when he appears this week before the defence select committee. Its chairman Julian Lewis said: “The committee have had correspondence strongly against and in favour of the hostile takeover bid and I therefore wouldn’t be surprised if the topic came up [during the committee hearing].”

There is growing concern across Whitehall about the impact this aggressive takeover of GKN would have, especially the long-term defence and security implications it may have for the UK.

The takeover already faces the prospect of wider investigations, with the business, energy and industrial strategy committee expected to scrutinise it further after initial questions were raised by chairman Rachel Reeves.

The Department for Business, Energy and Industrial Strategy is understood to be monitoring the situation closely, and a senior civil servant has been appointed to examine the impact of a takeover.

The US’s own committee on foreign investment will also have to examine any takeover, as will the authorities in France and Germany.

GKN dates back nearly 260 years and made cannonballs for the British Army during the Napoleonic Wars.

It now has around 6,000 employees in the UK among 58,000 worldwide. It is a key supplier to aerospace firms including Airbus, with bases in towns including Redditch, Luton and Telford.

Melrose specialises in buying underperforming firms and selling them on at a profit within three to five years. Liberal Democrat leader Sir Vince Cable has urged the Government to block the bid for GKN, calling Melrose an “utterly unsuitable owner”.

Speaking in the Commons earlier this month, the Prime Minister said: “Of course the Business Department will be looking closely at, and has been following closely, the issue. I and the Government as a whole will always act in the UK national interest.”

Concern about a GKN takeover has also been raised in the United States, where Congressman Neal Dunn has written to the committee on foreign investment urging it to block the bid.

He said: “In addition to concerns over who may ultimately acquire GKN, Melrose’s business strategy will undermine long-term investments in research and development and secure supply chains, which are critical to the major defence platforms GKN currently supplies.”

Any takeover would have to be considered by Germany’s federal ministry of economic affairs and energy and the French ministry of economy, according to documents made available by Melrose.

Melrose’s executive officers say that they “welcome any and all opportunities to explain to government why we [Melrose] believe a merger with GKN will create an industrial powerhouse of which the UK can be rightly proud”.

They added: “Melrose builds businesses to long-term health and prosperity and has an impeccable pension track record.”

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