Tag Archives: GKN

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, Government, Technology, United States

Probity needed over GKN bid

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.

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