The Defence Secretary Gavin Williamson has secured a ‘veto’ over the sale of sensitive parts of GKN’s business by its controversial new owners.
Asset-stripper Melrose told the stock exchange this week that it had completed its £8billion takeover of the 259-year-old engineering firm.
Ministers were reported to have raised ‘no national security concerns’ despite GKN’s substantial defence interests.
But Whitehall sources said last night Mr Williamson had raised a number of concerns about the sale that will result in restrictions on Melrose’s ability to sell off parts of the firm to foreign bidders.
Melrose will have to agree new concessions in the coming fortnight before the deal is given the green light by Business Secretary Greg Clark.
The Defence Secretary Gavin Williamson (pictured) has secured a ‘veto’ over the sale of sensitive parts of GKN’s business by its controversial new owners
Sources said last night Mr Williamson had demanded an ‘effective veto’ on national security grounds over the onward sale of parts of the firm.
The move is a victory for the Daily Mail, which has campaigned against the sale of a firm that has been supplying Britain’s armed forces since it produced cannonballs for use in the Battle of Waterloo.
Whitehall sources said Mr Clark and the Cabinet Office had both been keen to wave through the bid until the Mail’s campaign got under way.
‘This would have just gone through on the nod if no one had kicked up a fuss,’ a source said.
The outcome also underlines Mr Williamson’s growing Cabinet influence.
An ally said: ‘He’s dug his heels in and won a significant concession that will mean vital defence parts of GKN can’t be sold into foreign hands without the backing of the Defence Secretary.’
Officials are now drawing up a legal ‘deed’ that Melrose will be asked to sign before the takeover is approved.
The document will require the firm to seek the approval of the Defence Secretary before selling on specified parts of the company’s operations abroad.
GKN is involved in a number of sensitive areas and has access to classified government information that ministers do not want to see fall into foreign hands.
These include parts for the F-35 fast jets, the Typhoon fighter and the A400M transport plane. The composite technology used in the A400M’s wings is regarded as vital in keeping Britain at the cutting edge of the aerospace industry.
Asset-stripper Melrose told the stock exchange this week that it had completed its £8billion takeover of the 259-year-old engineering firm. Williamson had raised a number of concerns about the sale that will result in restrictions on Melrose’s ability to sell off parts
Mr Williamson’s demands go significantly further than the ‘guarantees’ secured by Mr Clark, which critics said were ‘not worth the paper they’re written on’. But they will not prevent the controversial deal from going ahead.
Ministers have concluded that there are no legal grounds for referring the deal to the Competition and Markets Authority and Mr Clark is expected to give his formal approval within the next fortnight.
Melrose had already made a ‘legally binding’ commitment to the Business Secretary not to sell off GKN’s aerospace division for five years. But critics said the pledge was worthless as it would not prevent the firm floating the division on the stock market or selling to a ‘suitable purchaser’.
The new restriction is tougher as it would require the consent of the Defence Secretary and applies indefinitely if the proposed sale is to a foreign bidder.
Under competition laws, which are based on EU regulations, the GKN deal could only be halted on national security grounds.
Mr Clark has previously suggested there was no objection in principle to the outcome of the ‘battle between two British companies’.
Melrose, which calls itself a ‘turnaround specialist’, has been branded the ‘unacceptable face of capitalism’ for its practice of buying firms and breaking them up.
Its bosses Simon Peckham, Christopher Miller, David Roper and Geoffrey Martin could share as much as £285million personally as a result of the takeover.
Airbus, GKN’s biggest customer, has already warned it would be ‘practically impossible’ to give further work to the firm if it comes under the control of owners with a short-term outlook.
The deal was also controversial because of the activity of ruthless hedge funds that snapped up 25 per cent of GKN’s shares in a matter of weeks in order to vote for a deal that was approved by a margin of 52:48.
Some ministers are pushing for the UK to tighten up takeover law after leaving the EU to protect strategically important British companies from predators.
Former deputy prime minister Lord Heseltine said the deal was not in the national interest, adding: ‘No other country of our sort would have allowed this.’
But Mr Clark told MPs that under the law he had only ‘narrow grounds’ to intervene. Only if the Ministry of Defence’s concerns could not be satisfied would a referral to the CMA be considered.
The Business Secretary has until the end of July to rule on the deal, but is expected to make an announcement in the next two weeks.