Melrose and GKN trade final barbs as vote approaches

Melrose Industries and GKN engaged in a final public slanging match before a shareholder vote on the turnaround company's hostile bid for the FTSE 100 engineer.

With a day to go until the 29 March deadline for shareholders to vote on its £7.9bn offer, Melrose first accused GKN of conducting a fire sale of its automotive business and then accused the board of "lack of candour and strategic vision".

Christopher Miller, Melrose's chairman, said: "Since we made our approach, GKN has repeatedly changed its strategy and contradicted itself […] We believe shareholders need to question the validity of the GKN Board's promises to increase shareholder value and meet its targets."

GKN responded by noting Melrose's late flurry of statements and accusing its unwanted suitor of drumming up promises in an attempt to sway opinion. GKN said pledging not to sell the aerospace left Melrose without necessary flexibility in a fast-changing industry whereas under the board's plan GKN would be a standalone aerospace company.

Mike Turner, GKN's chairman, said: "This morning's blizzard of announcements by Melrose, drafted in increasingly hysterical language, smacks of desperation. It has now been forced into giving commitments on a five-year hold period for GKN Aerospace to address its transient business model."

The exchange was the latest in an increasingly bitter bid battle since GKN revealed Melrose's initial approach in January. Melrose is seeking to go over the GKN board to gain shareholder approval for its takeover, which it says will allow it to overhaul an underperforming company.

The bid has become highly political, with MPs, unions and the Labour opposition raising concerns about Melrose's plans for one of Britain's oldest companies, which employs almost 6,000 people in the UK. Clark told Melrose he would consider the impact on national security, GKN’s workers and the wider economy when judging the deal.

Melrose sought to portray itself as acting in the interests of the UK economy and industrial base. After a request from the business secretary it agreed to base itself in the UK and not to sell GKN's aerospace arm for five years along with other commitments.

In further commitments, Melrose said its board would be British, its shares would be listed on London’s main market and GKN’s aerospace and automotive businesses would use the GKN name. GKN’s research and development spending will be at least 2.2% of GKN sales each year. If there is a shortfall it will be made up for by June 2024, Melrose said.

Melrose said it had been in talks with Clark and his department since its initial approach went public in January and that the exchange of letters was the culmination of those discussions. GKN has accused Melrose of being a short-term operator with little experience in its industry.

GKN plans to sell its automotive arm to Dana Inc of the US to release cash for shareholders and give them a stake in the combined business. Melrose said the plan amounted to a “fire sale” that would be bad for shareholders, employees, pensioners and the UK.