GKN/Melrose Takeover: Update

Lord Higgins Excerpts

Tuesday 27th March 2018 Lords Chamber

[Lord Henley]

My Lords, I note exactly what my noble friend has said. As he said, my right honourable friend has up to four months to consider these matters, depending on the advice he receives from colleagues in the Ministry of Defence. I am also grateful to my noble friend for referring to the response from Melrose. It is not for me to say whether that is a good or bad response; I just note that, ultimately, it has to be a matter for shareholders and others. But parts of that, as I made clear—the letter is now in the public domain—will be enforceable commitments, albeit some of them for only five years, and another part will be undertakings of a less enforceable nature. It is not for me to defend or attack that letter. I have simply set it out as the response that my right honourable friend the Secretary of State received from Melrose following his letter, in which he set out, first, his legal obligations under the 2002 Act—which gave him a relatively limited power to intervene, which is quite appropriate. Secondly, however, he stressed—I am grateful to my noble friend for underlining this—the wider interests he has as Business Secretary and the wider interests that the directors have under Section 172 of the Companies Act as regards what they must look at. In the end, the shareholders will have to take a view on that matter. As I said, it is possible that my right honourable friend will have to make a decision in a quasi-judicial manner. He must await advice on that, and at that stage, if appropriate, he will intervene.

[Lord Higgins (Con)]

My Lords, I share the view that this takeover proposal is important for the UK economy. My noble friend the Minister refers to legally binding contracts. There have been cases in the past where contracts have not been fulfilled by those taking companies over. What will be the consequences if these legally binding contracts are broken? In particular, since it seems unlikely that the takeover company in this case will retain indefinitely the company it has taken over—the expectation is quite the contrary—how will the legally binding commitment be carried forward as regards any future owner of the company?

[Lord Henley]

My Lords, I would need to take advice on that. I was quoting the letter from Melrose back to my right honourable friend the Secretary of State. In that letter—in the paragraph headed, “Takeover Panel enforceable undertakings”—Melrose states:

“We have been able to agree with the Takeover Panel”—


I imagine this is a matter for it—

“the form of the following legally enforceable undertakings”.

I am not aware of how and in what way those would be legally enforceable, but that is the assertion it made.