Melrose Industries has won control of the UK engineering giant GKN.
Despite protests from government, unions and GKN customers, Melrose won the support of 52% of investors.
The company, which specialises in turning around troubled manufacturing businesses, had offered to buy the company for £8.1bn in cash and shares.
Although GKN offered to overhaul itself and sell off its car parts division, it was not enough to stop shareholders backing Melrose’s offer.
Christopher Miller, chairman of Melrose, said: “We are delighted and grateful to have received support from GKN shareholders for our plan to create a UK industrial powerhouse with a market capitalisation of over £10bn and a tremendous future.”
GKN’s businesses cover aerospace and automotive engineering. Its Driveline division makes systems for roughly half the world’s passenger cars and light trucks.
Its aerospace division is a major supplier to the US military and a key partner on defence programmes such as the F-35 joint strike aircraft in which the UK government has a stake.
Melrose’s strategy it says, is to keep the company together “to improve all of the businesses in GKN, only realising their value once they have reached full potential.”
However, what happens afterwards has alarmed politicians and unions and some of GKN’s customers.
Greg Clark, the Business Secretary, wrote a letter to Melrose asking for “commitments, which would need to be binding in the event that your bid was successful”. These include maintaining the workforce, headquarters and R&D in the UK, and not selling defence businesses off in the short term.
The Unite union’s assistant general secretary for aerospace Steve Turner said: “Unite will be holding Melrose’s ‘feet to the fire’ over concessions it has made in recent days and seeking concrete guarantees on job security, investment and future work in the UK.
“The takeover is far from a done deal though. National security concerns remain not just for the UK, but for the US too, where the Committee on Foreign Investment in the United States is yet to approve the takeover and to whom Unite has made representations.
Before Melrose won the bid Airbus, which is supplied by GKN, said it would be “practically impossible” to give new business to GKN if Melrose’s offer was accepted because it damaged long-term investment prospects in the company, which could reduce research and development (R&D) budgets and limit innovation.
Melrose launched its bid in January, initially at £7bn. It increased that this month to £8.1bn, with up to another £1bn injected into the pension fund.
It argued that it could increase GKN’s profitability which had been falling steadily over the last five years.
In the run up to the bid, GKN had also suffered a crisis of leadership, with its chief executive-in-waiting, Kevin Cummings, forced to step down after problems in the company’s US aerospace division.
The new chief executive, Anne Stevens, a former Ford executive, devised a plan to merge GKN’s Driveline with the US car components group Dana to create a new company. GKN would get a 47% stake in it and $1.8bn (£1.28bn) in cash from Dana.
Melrose called the plans “panicked and fraught with contradictions”.
Source: BBC News