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| Version 4 | Version 5 |
|---|---|
| Government wades into GKN takeover battle | Government wades into GKN takeover battle |
| (about 1 hour later) | |
| Business Secretary Greg Clark has written to Melrose demanding "binding" commitments from the turnaround specialist over its £8.1bn bid for GKN. | Business Secretary Greg Clark has written to Melrose demanding "binding" commitments from the turnaround specialist over its £8.1bn bid for GKN. |
| He sought "extensive and clear" measures over GKN's workforce, research and development, and pension schemes. | |
| Mr Clark 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. | |
| The turnaround specialist said that for five years it would maintain the company's London listing, maintain its UK headquarters, and ensure research and development (R&D) spending was at least 2.2% of sales. | |
| If Melrose's bid succeeded, Mr Clark told MPs that the Ministry of Defence would seek a "legally binding commitment relating to the management of any defence contracts". | |
| He told the Commons he would await MoD advice before deciding whether to intervene in the deal on national security grounds. | |
| Deadline approaching | Deadline approaching |
| 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. | 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 automotive 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. | 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 said GKN should remain operating as a UK business, with its share listing and headquarters staying in the UK. |
| GKN should also maintain its UK workforce and respect existing employment rights. | GKN should also 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 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". | In the area of defence, the business secretary said he would expect "to see a commitment to continuity of ownership and strategic investment". |
| Also, Melrose should not quickly sell-on the business without the government's consent. | Also, Melrose should not quickly sell-on the business without the government's consent. |
| Tensions | Tensions |
| Mr Clark said he was "mindful the business model which Melrose operates and its history of acquiring, improving and selling businesses". | 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. | "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. |
| He said the public "reasonably" expects that companies which receive public money through contracts or R&D, should take a long-term view. | He said the public "reasonably" expects that companies which receive public money through contracts or R&D, should take a long-term view. |
| In response, Mr Peckham said Melrose's proposal was preferable to the "fire-sale being undertaken by the current GKN board". | 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. | 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. |
| "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." | |
| This would not prohibit it from floating the aerospace division on the UK stock market, Mr Peckham added. | |
| He also said that if it was approached by a "suitable strategic purchaser" before 1 April 2023, Melrose would seek government approval for the deal. | He also said that if it was approached by a "suitable strategic purchaser" before 1 April 2023, Melrose would seek government approval for the deal. |
| Analysis: Simon Jack, BBC business editor | |
| With two days left in which shareholders must decide whether to accept the bid - how many who liked the look of the Melrose bid will think again now that the company has tied its hands more than it may have liked? | With two days left in which shareholders must decide whether to accept the bid - how many who liked the look of the Melrose bid will think again now that the company has tied its hands more than it may have liked? |
| Not many, according to one big shareholder who spoke to the BBC. Certainly, the government thinks that Melrose has a good chance - and wanted to makes its concerns known while it still can. | Not many, according to one big shareholder who spoke to the BBC. Certainly, the government thinks that Melrose has a good chance - and wanted to makes its concerns known while it still can. |
| Whatever happens between now and Thursday, the future of GKN will look very different. | Whatever happens between now and Thursday, the future of GKN will look very different. |
| Investors have until Thursday lunchtime to decide - 50.01% is the level of support needed. | Investors have until Thursday lunchtime to decide - 50.01% is the level of support needed. |
| Read more from Simon here: |