Melrose has the ability to turn the tide of history by keeping GKN aerospace British says ALEX BRUMMER
Over the past two decades, the FTSE 100 and Britain have been exposed by nodding dog drivers too weak to fight to save emblematic companies and floppy shareholders mesmerized by cash and short-term returns.
The country’s corporate tax base has eroded and great technologies and skills have disappeared on the horizon.
The attack has done real damage to infrastructure, contributing to overcrowded airports, sewage flowing into our rivers and a lack of investment to secure energy supplies.
On a few occasions, a spirited defense – AstraZeneca is the best example – has saved a significant company. BAE Systems remained independent by serendipity as a compliant board attempted to steer the UK’s leading defense company into the sclerotic hands of Airbus. The sale of major Cambridge smart chip company Arm Holdings was brokered in Downing Street by Theresa May and Philip Hammond.
In the midst of this turmoil, this paper has never wavered in its belief that most foreign acquisitions have been disastrous for productivity and growth.
Now what?: One of the most bitterly fought battles of recent times was Melrose’s £7.4bn hostile takeover of long-established industrial group GKN in 2018
There are notable exceptions, such as AkzoNobel’s deal for ICI’s hull (it has continued to invest heavily in Britain) and Tata’s ownership of Jaguar Land Rover.
No one should miss the irony that one of the latest bid targets is the payments company Network International, with a focus on high-growth markets in the Middle East and Africa.
The company is the brainchild of Ron Kalifa, founder of payments champion Worldpay, who wrote a report for the Tories on how to improve the UK’s dynamic fintech sector. The money dangles Kalifa in front of former Bank of England governor Mark Carney in his role as chairman of the Canadian buyout company Brookfield.
One of the most bitter battles of recent times was Melrose’s £7.4 billion hostile takeover of long-established industrial group GKN in 2018. Success for Melrose was secured at the last minute by the narrowest of margins. Melrose is best known for its private equity approach, which has provided bosses with fantastic wealth, and its buy, improve and sell model.
The fight against the offer focused on the last two commitments. ‘Improve’ often meant savage cost cutting rather than R&D and ‘sell’ usually resulted in British engineering assets ending up in foreign hands.
Our campaign against the deal was not free. Melrose senior executives (and partners) chose to discredit the Daily Mail rather than accept that there was a respectable case against the deal. Reporters were the recipients of hostile emails from consultants.
But one couldn’t be happier to see Dowlais, GKN’s automotive arm, with its electric vehicle powertrain returning as a premium listing in London.
The sharp fall in the float price may be disappointing, but a valuable piece of British technology and some important R&D has been spared for the time being.
It is perhaps an exaggeration to suggest that Melrose bosses Jock Miller, Simon Peckham et al have learned from the searing experience of a disputed takeover and the belated stipulations placed on the deal by the government. It’s hard to imagine that this didn’t play a role in the decision to go public rather than sell to the Americans.
As things stand, Melrose is a stand-alone British advanced aerospace company with a legacy that includes the Spitfire.
The UK’s aerospace sector has been eroded by overseas and private equity deals, including flight refueling pioneer Cobham, satellite innovator Inmarsat and components group Meggitt. Melrose has the ability to turn the tide of history by keeping GKN aerospace British.
Blank blast
It’s not surprising to see Amanda Blanc of insurer Aviva lead the procession of leavers from the sex, drug and rock ‘n’ roll ravaged CBI.
Blanc is a no-nonsense chief executive who is never afraid to take a stand. Last year she stepped down as chairman of the Professional Rugby Union Board of Wales, later saying she was not listened to by her male counterparts.
Despite Aviva’s share price rising, Blanc faced reluctant exchanges at the AGM, with one shareholder complaining that she was not “the man for the job.”
Blanc may well prove the crucial departure as the CBI collapses in plain sight.