Melrose takeover of GKN: “Nothing patriotic” about blocking deal, MPs are warned
Politicians have been told not to meddle in Melrose’s controversial takeover of British engineering giant GKN.
Shareholders, not MPs, should decide how to run their businesses, the Institute of Economic Affairs (IEA) urged in a report published today.
Industrial turnaround specialist Melrose appeared to have prevailed at the end of March, securing the backing of 52 per cent of GKN for its £8bn hostile takeover.
But business secretary Greg Clark poured cold water on the victory celebrations in the hours that followed, saying the government would launch an assessment on whether the takeover would pose security concerns due to GKN’s involvement in the manufacture of military aircraft.
The IEA said GKN was “not a special case that needs extra protection from the government”.
“There is nothing patriotic about preventing the shareholders of British companies from deciding the best way to improve the performance of the businesses they own. This is ultimately in the best interests of employees, customers and the wider economy too,” said IEA chief economist Julian Jessop.
Next week Melrose’s takeover offer becomes unconditional, meaning authorities pose the main threat to it subsequently falling apart.
While the government has limited power to intervene on the basis of saving jobs and keep GKN in its current state, the IEA highlighted GKN’s own plans to break-up part of its business.
Read more: Melrose shorts build £1.3bn bet as sub-prime star Paulson piles in
Implications
The think-tank went on to highlight a “protectionist approach has implications for the wider economy”.
Jessop added:
Even if the conditions imposed so far on the Melrose takeover are not too onerous, the government is dictating business strategy to a private company. This is something that should make us all feel uncomfortable.
The findings come as Airbus chief executive Tom Enders admitted on Wednesday he hasn’t decided whether to oppose Melrose’s approach.
The aerospace giant, one of engineering company’s biggest customers, publicly supported the GKN’s management as stakeholders picked sides in Britain’s biggest corporate feud for nearly a decade.
“We did not take really a hard-nosed decision yet, but we have concerns about it,” Enders said during Airbus’ annual general meeting.
“It’s clear our aviation business is a long-term business and private equity is relatively volatile short-term.”
Read more: The government has warned it may block Melrose’s takeover of GKN