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| Government wades in to GKN takeover battle | |
| (35 minutes later) | |
| Business Secretary Greg Clark has written to Melrose seeking assurances from the turnaround specialist over its hostile £8.1bn bid for GKN. | |
| Mr Clark sought "binding" commitments over GKN's workforce, research and development, and pension schemes. | Mr Clark sought "binding" commitments over GKN's workforce, research and development, and pension schemes. |
| He also raised concerns over national security given GKN's role in supplying the UK armed forces. | He also raised concerns over national security given GKN's role in supplying the UK armed forces. |
| In response, Melrose set out a number of pledges, including not selling GKN's Aerospace Division for five years. | In response, Melrose set out a number of pledges, including not selling GKN's Aerospace Division for five years. |
| It also said that for five years it would maintain GKN's UK listing, maintain its UK headquarters, and ensure research and development (R&D) spending remained at least 2.2% of sales. | It also said that for five years it would maintain GKN's UK listing, maintain its UK headquarters, and ensure research and development (R&D) spending remained at least 2.2% of sales. |
| GKN makes parts for planemakers Airbus and Boeing, as well as parts for Volkswagen and Ford cars. | GKN makes parts for planemakers Airbus and Boeing, as well as parts for Volkswagen and Ford cars. |
| It is one of the UK's largest industrial firms, employing more than 59,000 people globally - 6,000 of them in the UK. | It is one of the UK's largest industrial firms, employing more than 59,000 people globally - 6,000 of them in the UK. |
| Melrose specialises in buying up industrial companies it believes are undervalued and restructuring them before selling them on. | Melrose specialises in buying up industrial companies it believes are undervalued and restructuring them before selling them on. |
| GKN shareholders have until midday on Thursday to accept the bid from Melrose, or back GKN's own business plan. | |
| The plan includes combining GKN's auto unit with US group Dana, leaving GKN to concentrate on its aerospace business. | |
| In his letter to Melrose chief executive Simon Peckham, Mr Clark set out a series of commitments "which would need to be binding" if the company's bid for GKN was successful. | |
| He said GKN should remain operating as a UK business, with its share listing and headquarters staying in the UK. | |
| He also said GKN should maintain its UK workforce and respect existing employment rights. | |
| In addition, Mr Clark sought commitments over investment in R&D, investment in workforce training, and arrangements for current and future pensioners. | |
| In the area of defence, the business secretary said he would expect "to see a commitment to continuity of ownership and strategic investment specific to the defence related business of GKN and to exclude the option of a short-term sale of this business without the consent of the government". | |
| Mr Clark said he was "mindful the business model which Melrose operates and its history of acquiring, improving and selling businesses". | |
| "Whilst this approach can have an important and beneficial role to play, tensions could arise between this approach and the need for long-term investment and stability. | |
| "The public should reasonably expect that companies that benefit directly or indirectly from long-term public sector contracts or indirectly from government-supported long-term research and development should be willing and able to adopt appropriate time horizons on investment decisions." | |
| In response, Mr Peckham said Melrose's proposal was preferable to the "fire-sale being undertaken by the current GKN board". | |
| He said Melrose had agreed a number of legally enforceable undertakings with the Takeover Panel to address the government's concerns - including maintaining GKN's UK base and its spending on R&D. | |
| In addition, he said: "To demonstrate the strength of our commitment and ensure that its improvement and investment programme is not unduly interrupted, we are willing to make a legally binding commitment to you.. that, subject to below, Melrose will not sell the Aerospace Division before 1 April 2023." | |
| Mr Peckham added that this would not prohibit it from floating the Aerospace Division on the UK stock market. | |
| He also said that if it was approached by a "suitable strategic purchaser" before 1 April 2023, it would seek government approval for the deal. |