UPDATE: Melrose Has Made No Commitments Over Driveline Future - GKN

27th Mar 2018 14:44

LONDON (Alliance News) - GKN PLC on Tuesday said the need for the UK government to intervene and seek commitments from Melrose Industries PLC over its GBP8.4 billion hostile takeover bid for GKN is further evidence that Melrose is the wrong owner for this business and that shareholders would be taking a risk in accepting the offer.

Industrial turnaround specialist Melrose has committed not to sell the GKN Aerospace business before April 1, 2023, but it has not made any commitment about the future of GKN Driveline.

"In other words, the future of GKN Driveline becomes immediately uncertain under Melrose's ownership in contrast to its certain future under the Dana/GKN Driveline combination," GKN said. It added that Melrose's pension proposal would create a group with high leverage and leave gross pension liabilities in excess of GBP4.3 billion, which would be borne by shareholders.

"The fact that Melrose appears to have been forced into these undertakings shows once again that it would be an unsuitable owner of GKN," GKN Chief Executive Anne Stevens said.

Earlier on Tuesday, the UK government sought several commitments from Melrose over its hostile takeover bid for GKN, as it evaluated whether the bid would gives rise to national security concerns.

The UK Secretary of State for Business, Energy & Industrial Strategy Greg Clark in a letter dated Monday sought binding commitments from Melrose, if its bid for GKN was successful, over operating a UK headquartered and listed business, maintaining a UK workforce, continuing to pay UK taxes, continuing to invest in research and development programmes and making arrangements for current and future pensioners.

"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. I am aware that you are separately discussing with the Ministry of Defence the terms of an agreement that would satisfy any concerns that the Defence Secretary may have," Clark said.

Clark's letter to Melrose seeking specific commitments relating to its GKN bid was published on Tuesday.

In response, Melrose said Tuesday that it has agreed with UK takeover panel legally binding undertakings in relation to maintaining Melrose's headquarters in the UK and a London stock listing for a period of five years. The company also gave commitments over research and development spending of GKN.

Shares in Melrose were trading 1.0% higher at 223.30 pence. GKN shares were trading 1.2% higher at 436.80p.

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