The ‘asset strippers’ set to buy British engineering giant GKN could be forced to sign legal agreements promising not to sell its crucial aerospace division, it emerged last night.
Melrose narrowly won approval for its controversial £8billion takeover on Thursday, but the deal is being closely scrutinised by defence chiefs.
There are growing hopes it could be blocked by ministers on national security grounds.
Defence Secretary Gavin Williamson, who expressed ‘serious’ reservations in February, is said to be particularly concerned over sensitive contracts held by GKN.
Defence Secretary Gavin Williamson expressed ‘serious’ reservations over sensitive contracts held by GKN
The firm’s aerospace division, which once made Spitfires, makes components for F-35 jets and Typhoon aircraft. Critics have urged Business Secretary Greg Clark to stop the takeover.
He is expected to listen to advice from the Ministry of Defence in the coming days and weeks before deciding whether to intervene.
In a letter to Mr Clark on Tuesday, Melrose had said it would be willing to agree to binding pledges that would protect the aerospace arm.
But the promise was not included in a list of undertakings made to the UK Takeover Panel, published a day later.
This weekend, it emerged Melrose may agree to offer legal guarantees not to sell the division for a period of time – in a bid to assuage doubts and force the deal through.
Labour MP Jack Dromey is urging the Government to stop it or extract cast-iron guarantees that Melrose will not sell the aerospace division.
He said yesterday: ‘The MoD is looking at this deal very seriously to see what the strategic implications will be. A five-year commitment from Melrose not to sell the aerospace division is worthless.
‘Typically research and development and production times in defence vary from ten to 15 years in timescales … if this takeover goes ahead, Britain’s strategic defence interests would be put at risk.’
Melrose chief Simon Peckham yesterday insisted bosses were ‘here to protect national security, not damage it’. ‘We will give any undertakings the Government requires on that,’ he added. ‘We are all British. We live here and our families live here … we are as concerned about national security as anyone else.’
GKN makes parts for the Black Hawk, Chinook and Apache helicopters, which are all used by the American military, as well as for secret US Air Force projects. The US also provided the bulk of funding for the F-35 jet programme.
Melrose chief Simon Peckham yesterday insisted bosses were ‘here to protect national security, not damage it’
It has prompted Republican congressman Neal Dunn to urge the powerful US Committee on Foreign Investment to block Melrose’s bid. The committee is yet to clear the deal.
Mr Dunn has said: ‘Its business strategy will undermine long-term investments in research and development and secure supply chains.’
Melrose’s letter to Mr Clark said: ‘To demonstrate the strength of our commitment and ensure its improvement and investment programme is not unduly interrupted, we are willing to make a legally binding commitment to you that, subject to below, Melrose will not sell the aerospace division before 1 April 2023.’
There were several caveats, though, such as being able to sell ‘non-core businesses’, the deal not preventing a stock market flotation of the division and leaving open a possibility the Government could still agree to back a sale to ‘a suitable strategic purchaser’.
A Melrose spokesman said: ‘All the commitments we have made are legally binding. We stand by them 100 per cent.
‘We are baffled by the campaign to call into question undertakings made in good faith by a British company to the UK government. When we make a commitment, we stick to it and our track record is testament to that.’
A spokesman for GKN declined to comment.
Tories ‘must tackle fat cat pay… or they’ll lose election’
The Conservatives will lose the next election unless they tackle fat cat pay, a former adviser to Margaret Thatcher warned yesterday.
Lord Young, who served as trade secretary in the Thatcher government in the late 1980s, hit out at the ‘unbelievable amounts of money people are paying themselves’ for doing ‘bureaucratic jobs’ at the top of large corporations.
The Tory grandee (pictured, right) warned that public anger over pay packages for City fat cats was driving voters towards Labour.
It comes after it emerged directors at City predator Melrose could share bonuses worth up to £285 million if they succeed in the £8 billion takeover of engineering giant GKN.
Questions have also been asked about an extraordinary £110 million bonus awarded to Jeff Fairburn, head of house builder Persimmon. Asked about Mr Fairburn’s bonus, Lord Young told the Mail on Sunday: ‘It is getting appalling … I’m not sure what people who run large companies are doing paying themselves large amounts of money.
‘That is wrong – there’s no question about it … and that will lose us an election.’ He said the Tories would always be ‘happy to become wealthy by creating wealth’, but suggested many chief executives did not take the kind of risks that could justify their rewards.
‘Being at the top of a large company is almost a bureaucratic job, and yet you find people earning £5million, £1million – ridiculous amounts,’ he added.