The GKN – Melrose Industries sale has gone through. GKN has been sold to Melrose Industries after a fierce battle to remain independent. UK engineering firm GKN has been involved in many of the UK manufacturing landmarks, from the manufacture of Spitfire fighter planes to the iconic 1960s car, the Mini. It has now been sold to an investment firm, which is controversial to say the least, Melrose Industries.
Melrose Industries specializes in taking on failing businesses, turning them around and then selling them on to the highest bidders. It acquired GKN after receiving the backing of 52% of GKN shareholders. Melrose was described as a “short-term asset stripper” by the Labour Party, although UK Business Secretary Greg Clark now expects Melrose to stick to the commitment it made to keep the company in the UK.
The bid acceptance by shareholders resulted in GKN shares rising by over 6% to £4.50 per share. The accepted offer by Melrose was £4.62 a share. GKN is not unknown in business, and it owns Driveline that manufactures systems used by around 50% of the worlds light trucks and automobiles so it is not exactly unknown!
GKN – Melrose Industries Sale and US National Security Issues
According to Melrose, its plan is to maintain GKN as it is, improve all of its businesses. It may then realize their value once they have been seen to reach their full potential. However, Unions and many individuals are extremely concerned about this. Melrose does not have a good record of keeping their acquisitions intact.
Union concerns and National security concerns in the US may still result in the takeover being blocked. It has still to be approved by the Committee on Foreign Investment in the United States. The Unite Union has also made representations to this Committee regarding the deal. The fear could result in a breakup of GKN businesses.
GKN Airbus Business an Issue
Time will tell whether this takeover goes through or not, though for the time being it appears to be a done deal. Nevertheless, Union and US involvement may muddy the waters. Another issue is Airbus, a GKN client. Airbus stated that it would be “practically impossible” for it to give GKN new business since Airbus believes that Melrose would reduce investment in R&D and “limit innovation.” So who knows what the future of this takeover will hold!