GKN takeover decision slammed

Business secretary Greg Clark waved through the Melrose takeover of GKN in a statement today (April 24) in Parliament – a move which Unite has slammed.

Clark said that “on the basis of the commitments given relating to national security, the ministry of defence concluded that statutory intervention is not required.

“My judgement is that there are not reasonable and proportionate grounds to make a statutory intervention on the grounds of national security.”

Assurances not enough

Clark outlined additional assurances he had received after the takeover by Melrose was completed earlier this month, but Labour shot back that the assurances did not go far enough and that their legal enforceability is questionable.

Labour’s shadow secretary Rebecca Long-Bailey said that Melrose’s assurances obtained by the government both before and after the takeover vote – such as pledging to not sell the business for five years and allowing the government to veto the future sale of only certain parts of the business – fall short.

“[The assurances] are not sufficient to guarantee the long-term prospects of the company and indeed the workforce,” she said.

Long-Bailey highlighted that the government failed to obtain other important post-offer undertakings – which are legally binding – such as maintaining employment levels and keeping tax residency status in the UK.

“The maintenance of employment is vital for our national security because the loss of these jobs will mean a diminishment of vital skills which are integral to our defence industry,” she said.

Takeover laws

She also criticised the “inadequacy of the takeover regime to protect companies outside of the very limited grounds” that the government is able to intervene, such as in the interest of national defence, media plurality or financial stability.

“If it falls beyond these grounds, the secretary of state cannot act, even if the takeover may be harmful for the business, harmful to employees, harmful to research and development and harmful to supply chains,” she noted.

Labour MP Jack Dromey called today a “bleak day for British industry and British workers when a 259-year-old icon of British engineering excellence falls prey to a hostile takeover thanks to hedge funds moving in to make a quick killing.”

Dromey slammed the UK’s lax takeover laws which – as in the case of the GKN takeover – allow shareholders with no long-term interest in the firm to buy up shares just before a takeover vote. They can also influence the vote through derivatives, without even owning actual shares.

Labour MPs contrasted this approach with other companies in Europe such as Germany which protect companies from hostile takeovers.

Unite has also called for a root and branch overhaul of the UK’s takeover laws – the union estimated that in the case of GKN, over 25 per cent of the GKN shareholder base could have been influenced by hedge funds with many holding an economic interest in GKN through derivatives rather than actual shares.

‘Major question marks’

Unite is set to meet Melrose in the coming fortnight to press bosses on their plans for the company and secure guarantees over jobs and assurances that were given during the takeover on future investment, pensions and research and development.

“Time will tell whether the assurances given to the business secretary Greg Clark and the ministry of defence by Melrose are worth the paper they are written on,” said Unite assistant general secretary for manufacturing Tony Burke. “There are still major question marks over the future of the workforce and job security.”

“Unite will be meeting with Melrose’s bosses pressing for further detail over its plans and seeking the job guarantees which are absent from the undertakings given to the business secretary Greg Clark,” he added.

“GKN was at the forefront of electric vehicle technology and is a major cornerstone to the government’s industrial strategy. Our fears remain that this could jeopardised with parts of the business sold-off piecemeal and jobs shipped off overseas.”

Unite assistant general secretary Steve Turner added that the government “needs to learn the lessons of the GKN takeover, which saw short-term speculators and hedge funds influence the outcome of Melrose’s bid without actually owning any shares.

“The whim of hedge funds looking to make a short-term quick buck through takeover trading is in danger of driving a coach and horses through the UK’s industrial strategy,” he noted.

“Ministers need to ask themselves is it right that national defence interests and those of long term investors can be trumped by short-term speculators who do not even own shares in a takeover target?

“Following ministers’ refusal to properly act following the Cadbury takeover, the government must urgently strengthen takeover rules now and stop hedge funds influencing takeover bids through the use of derivatives at the expense of national and long-term interests.”