- The pledges are in response to demands by business secretary Greg Clark
- Melrose pledged to maintain level of research and development funding
- It also said it will invest in apprenticeships
- But it did not mention Clark’s request to keep UK workforce
Turnaround specialist Melrose has pledged to not sell GKN until 2023, maintain the current level of research and development funding and invest in apprenticeships in a bid to win the government backing for its takeover.
The pledges are in response to demands by business secretary Greg Clark, who raised concerns over Melrose’s potential short-term interests and demanded ‘extensive and clear’ commitments from the company.
It comes as one of the most contested acquisitions in years nears D-Day, with GKN shareholders having until Thursday to accept or reject Melrose’s bid or back a plan from GKN’s management to revive the business’s fortunes by selling two divisions – including its automotive business to America’s Dana.
Business Secretary Greg Clark has weighed in to the Melrose offer for GKN
Facing pressure by UK politicians to give assurances over the future of GKN, Melrose pledged to maintain GKN’s UK listing and headquarters and to ensure that a majority of its directors are resident in the UK.
It also said it would spend at least 2.2 per cent of sales on research and development and pump £10million into GKN over five years to support the creation of between 100 and 150 new apprenticeships.
Melrose added it reserved the right to list GKN’s aerospace unit on the stock market but would seek approval from the Government to sell it if the opportunity arises.
Melrose chief executive Simon Peckham told Clark in a letter: ‘To demonstrate the strength of our commitment to ensure that its improvement and investment programme are 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 April 1 2023.’
He added that this approach was ‘in direct contrast to the fire-sale being undertaken by the current GKN board’.
Among Clarks’ demands was also to ‘maintain UK workforce and respecting the existing employment rights of that UK workforce’ – a demand which however was not mentioned in Melrose’s pledges.
Clarks said: ‘I recognise that any listed company may be subject to future takeover and so cannot guarantee its ownership indefinitely.
‘However, I am concerned that a short-term approach to ownership may not be compatible with maintaining the longer-term relationships which characterise the best interests of the defence field.
‘In the light of this I 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.’
Peel Hunt analyst Harry Philips said: ‘Melrose has announced this morning that it has signed a series of Post Offer Undertakings as part of its final offer for GKN. These include Melrose keeping its head office in the UK and maintaining a UK listing but the key one is committing to spending 2.2% of GKN sales on R&D pa out to end 2023.
‘It is important to have these points laid out in such a way but the inherent core of Melrose would cover all of these factors off anyway. Melrose is an investor in its assets in order to improve them and increase their value rather than strip them. The political noise and chagrin will not disappear overnight but there is a strong sense that these hurdles are getting lower.’