The GKN break-up is a test for Melrose, don’t bank on a tax cut and Marc Bolland is not just any NED
Vultures. Asset-strippers. Corporate predators. The board of Melrose has had these perjorative labels and more thrown at it in the months since its initial bid approach for GKN.
This week’s approval by the Committee on Foreign Investment in the United States of the £8bn takeover removed the final obstacle to a deal that elicited greater political controversy than any British merger since Kraft Foods’ purchase of Cadbury.
Now, the break-up of GKN is about to begin.
I understand that Jefferies is being lined up to work alongside Rothschild on the disposal of the UK engineering group’s Powder Metallurgy division.
The sale, which will probably kick off in September, is likely to fetch between £1.5bn and £2bn – and yield inevitable howls of protest about the auction of a British industrial asset.
That would be a fallacy.
GKN had signalled the disposal of Powder Met as part of its defence against Melrose, and was preparing to offload other businesses too to generate sufficient proceeds for a compelling cash sweetener for investors.
The safeguards extracted from Melrose by the UK government encompass GKN’s defence-related assets, and Whitehall’s intervention in the sale of Gardner Aerospace to a Chinese buyer illustrates ministers’ appetite to appear zealously protective of British national interests.
It’s far from obvious, though, why this should pave the way for political interference in commercial processes like Melrose’s planned sale of GKN assets outside the defence sector.
Read more: The government will not block the Melrose takeover of GKN
The biggest error committed so far by Melrose bosses has been their demonstration of a tin ear to complaints about executive pay, fuelling a sense in some quarters that they are merely rapacious corporate predators.
Here too, though, their promise to review the company’s remuneration policy to take account of its broader stakeholder group after the GKN deal is set in stone.
They should be held to account over it.
Melrose executives were at pains during the takeover process to stress their Britishness, and their patriotism.
At this stage, for anyone not intrinsically opposed to their deployment of a private equity investment model on the public markets, there seems little reason to doubt either.
Don’t bank on tax cut
Blame the NHS.
If tax cuts for banks were ever going to be seriously contemplated by the chancellor, that prospect now appears as likely as Vladimir Putin engineering a bye for England into the World Cup Final.
City chiefs get full marks for trying, though.
At a meeting with Philip Hammond last month, Bob Wigley, the chairman of UK Finance, is said to have pressed for a comprehensive review of the tax burden on the financial services industry.
Wigley declined to comment, but to others in the room, it sounded like a thinly veiled request to reform or scrap the Bank Levy, introduced by George Osborne in 2011.
It is far from a novel plea, and it seems unlikely for as long as taxpayers remain directly exposed to the industry through their stake in Royal Bank of Scotland.
Even some of the signatories themselves believe such repeated requests are a futile use of lobbying capital that would be more productively deployed elsewhere.
Bolland not just any NED
What’s the laziest cliche in financial journalism?
There’s plenty of competition for that dubious accolade, but right up there must be prefacing anything connected to Marks & Spencer (M&S) with the phrase “This is not just any…”
The corridors of the Department for International Development will probably be reverberating to
the sound of that well-worn catchphrase, since sources tell me that Marc Bolland, M&S’s former chief executive, has just become its lead independent director.
Read more: M&S set to reveal Bolland earned over £15m as boss
Bolland is the latest in a string of prominent corporate names to be drafted into Whitehall departments since the 2010 General Election.
The results of what remains a long-term experiment are nevertheless debatable, especially given the strictures on their roles and the corporate track records of some of those involved.