GKN/Melrose Takeover: Update

Lord King of Bridgwater Excerpts

Tuesday 27th March 2018 Lords Chamber

[Lord King of Bridgwater (Con)]

My Lords, the House will recognise that this is a very serious announcement about a major British company that is obviously facing some difficulties in its present operation and is now the subject of this takeover bid. It is extremely worrying that this has occurred at a time when, obviously, the future prospects for our economy are far from certain in the present Brexit developments. The Secretary of State was absolutely right to ask for the clearest undertakings, although, as the noble Lord from the Front Bench said, it has come rather late. I do not understand at all the idea that the Secretary of State has up to four months in which to intervene in something that may have already taken place. However, he does recognise that it is not just a matter of national security: the Secretary of State says he has a wider concern that the takeover should not act against the interests of the economy. He asked for undertakings from Melrose Industries plc, but I find them extremely inadequate. The company says that it is prepared to give an undertaking to maintain its UK listing and UK headquarters for five years, and to,

“ensure that the Aerospace and Driveline divisions retain the rights to the GKN name”.

However, it goes on later to say that if a strategic purchaser comes forward with an investment proposal prior to 2023, it hopes that it would be allowed to consider that. It goes on to add:

“Unfortunately, as a result of the nature of the transaction, we have not had access to the information we would expect in order to make detailed commitments”.


By the end of that, I wonder just what commitments are being given. This is a very serious matter and the Government need to think very carefully indeed. I pay tribute to Melrose, which is obviously an extremely successful company, whose business will be to acquire it and to sell it on. No doubt it will make a great success of that, and full marks to it for its approach. Whether or not it is appropriate in this situation, a heavy burden is on the Government to get far clearer and far more binding undertakings that will give some form of security to an essential part of the UK industrial economy.

[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.