A controversial investment firm has bought over one of the oldest engineering form in the U.K. for a deal worth £8.1 billion.
The efforts to stay independent was ultimately lost by GKN – that has played a role in manufacturing everything from Minis to Spitfires.
52% of GKN shareholders backed the sell-off of the firm to the investment company Melrose Industries which has earned a name for itself in turning around sick companies and then selling them off at significantly higher prices.
The commitments that had bene made by Melrose now has to be maintained by it, said U.K. Business Secretary Greg Clark.
The deal was condemned by Labour which called Melrose a “short-termist asset-stripper”.
The management of the company would not work to make sure that the company succeeds once again, it said while admitting defeat.
The government, unions and GKN customers all protested the battle for GKN. The engineering firm has 6000 employees in the U.K. and 58,000 worldwide.
The investors of the firm were not convinced not to sell of their shares by the promises of the GKN management to turn around the company and shut down the and sell off its car parts division.
Christopher Miller, chairman of Melrose, said: “We are delighted and grateful to have received support from GKN shareholders for our plan to create a UK industrial powerhouse with a market capitalisation of over £10bn and a tremendous future.”
There was a 6% increase in the shares of GKN following the news of the deal.
Aerospace and automotive engineering are the sectors that GKN operates in. about half the world’s passenger cars and light trucks are fitted with systems made by the Driveline division of ythe company.
For U.K defense programs such as the F-35 joint strike aircraft, that also has a stake of the UK government, has GKN as a key partner and the company is also an important supplier for the US military.
Melrose wants to keep the company together “to improve all of the businesses in GKN, only realising their value once they have reached full potential.”
However, some of GKN’s customers, politicians and unions have been alarmed by what happens afterwards.
Mr Clark said: “During the bid, Melrose made commitments which they are bound to honour including investment in research and development and maintaining itself as a UK business.
“Now that shareholders have made their decision the government has a statutory responsibility to consider whether the merger in its proposed final form gives rise to public interest concerns in the areas of media plurality, financial stability and national security.
“This assessment will be made by the appropriate authorities and the conclusion set out in due course.”
Because long term investment prospects in GKN would be dampened if the company was given to Melrose, therefore it would be “practically impossible” to offer new business to the company, Airbus had said before Melrose won the bid.
(Adapted from BBC.com)