GKN: Proposed Takeover by Melrose — House of Commons, 2018-03-27
Topic: Domestic Commerce
Rebecca Long-Bailey (Labour, Centre-left): I thank the Secretary of State for today’s update. Sadly, however, the letter sent by the Government yesterday and the response by Melrose offer very little certainty and raise even more questions First, it was on 8 January 2018 that the board of GKN received a preliminary and unsolicited proposal from Melrose to acquire the entire share capital of GKN. Melrose put in its formal offer on 1 February. Concerns about Melrose’s plans had been raised by trade unions, Members of this House and the media for months, yet it took until 26 March for the Government to write to get some assurances from Melrose. So why did the Secretary of State wait until the last minute My second question concerns the enforceability of the assurances themselves. Which of the assurances and commitments given by Melrose in its letter of 27 March are actually legally enforceable and binding, because on my reading of the letter, it seems that very few are? Specifically, can the Government confirm that the commitments given under the heading "Takeover Panel enforceable undertakings" are indeed enforceable and will be enforced by the takeover panel? Can the Government also confirm that all the commitments below the paragraph headed "Long-term commitment" are totally unenforceable? What powers do the Government have to enforce any of the empty promises from page 2 onwards that are not post-offer undertakings? My discussions with the takeover panel suggest that enforceability is indeed limited to the areas referred to in Melrose’s letter under the heading "Takeover Panel enforceable undertakings". I must also express concern regarding the "flexibility" that Melrose requests in relation to any offers it receives to sell the aerospace division prior to 2023. What will the Government do to protect this business and, indeed, the other elements of the business that are not even referred to in Melrose’s letter? Do we take their omission as a clear indication that they will not be protected My third question is about the substantive content of the assurances. Why did the Government not ask for or receive any post-offer undertakings on maintaining or increasing employment at GKN over a 10-year period? These can clearly constitute post-offer undertakings under takeover code. Indeed, when SoftBank took over Arm Holdings, it promised to increase the total number of UK Arm group employees to at least double the total number as at the takeover date. It is also not clear why Melrose did not include UK tax residency as a post-offer undertaking. Similarly, I would argue that many of the things that the Government asked for were weak and meaningless. For example, when the Government asked for the maintenance of a UK workforce, what did they actually mean? Is one employee in the UK enough to fulfil this condition? Similarly, on investing in the training and development of the workforce, how much, and by what time My fourth question concerns the Secretary of State’s powers under the Enterprise Act 2002 to block the bid on national security grounds. It would be helpful if he confirmed that Melrose has indeed waived the condition to get the approval of the Committee on Foreign Investment in the United States. More importantly, the Secretary of State still has the powers to block this on grounds of UK national security, so will he confirm unequivocally today whether he will do this Finally, there are reports that merger arbitrage funds are planning to accept the Melrose offer, but as they are holding derivatives of GKN shares, they will not pay stamp duty on the transaction. Will the Secretary of State undertake that if Melrose does indeed proceed with this offer, the Government will investigate all share dealings to ensure that the correct stamp duty has been paid If the Government think that today’s weak, late and unenforceable assurances from Melrose are sufficient, then they are deeply mistaken. There is nothing to assure workers, nor to put to bed concerns about our industrial strategy and national security. As my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) so eloquently stated recently, GKN is a jewel in Britain’s industrial crown that employed generation after generation. It needed a Government prepared to fight for its future, and I am afraid that the response so far has been far less than adequate.