GKN/Melrose Takeover: Update — House of Lords, 2018-03-27
Topic: Mixed Topics
Oliver Michael Robert Eden (Conservative, Centre-right): My Lords, I shall make a fist at answering some of the points put to me by the noble Lord, Lord Stevenson, and the noble Baroness, Lady Kramer. However, I apologise in advance if I fail to do so on some points as this issue is highly technical. I want to be very careful about precisely what I say, bearing in mind that my right honourable friend will possibly have to make quasi-judicial decisions following advice from the Ministry of Defence. I am not party to that but the noble Baroness and the noble Lord will understand what I mean: I have to take care over what I say The noble Lord’s first criticism was that we were slow off the mark on this issue. I can assure him that right from the start, from the moment we knew there was a bid—it goes back only to January—the Government have monitored this and paid attention to it. As the noble Lord will know, as things have hotted up, we have taken a more active line; hence the letter from my right honourable friend yesterday, to which he and the noble Baroness referred. I will say a little more about that, and about the response today from Melrose The noble Lord also asked about the timescale and what we will do to keep the House informed. I can assure him that we will keep the House informed as things happen, as my right honourable friend made clear. The Secretary of State set out the statutory timeframe under the 2002 Act. He will inform the House if an intervention is ordered, again in line with his quasi-judicial powers. As I made clear, there are limits to what my right honourable friend can and cannot do. He set out in his Statement just when he could intervene under the terms of the Act. In the third paragraph of the letter to Melrose, he again makes it clear that the Act gives powers to the Secretary of State to act in a quasi-judicial manner He goes on to say, when talking about broader stakeholder interests, that in addition to his statutory role, he, as Business Secretary, had a wider concern that, "where important businesses are involved, takeovers should not act against the interests of our economy, employees or the broader set of stakeholders" He adds that Section 172 of the Companies Act, to which he referred in his Statement, sets out that statutory requirement for directors, "to have regard to, amongst other things, the interests of the company’s employees; the company’s business relationships with suppliers, customers and others; and the impact on the community and the environment" A response to that letter came through from Melrose. It is now available in the Library, and I hope the noble Lord, the noble Baroness and others have seen copies of that letter. In the letter, Melrose again set out what it felt it could do, particularly where it agreed with the takeover panel on the form of the legally enforceable undertakings: "For a period of five years, Melrose will: maintain its UK listing; maintain its UK headquarters; ensure a majority of its directors are resident in the UK …", and so it goes on. There are commitments about the amount of research and development it will invest in. That is all set out in what it refers to as its takeover panel-enforceable undertakings. The letter goes on to make further long-term commitments that we hope that it, as an honourable company, will adhere to should it be successful. That is obviously, as my right honourable friend made clear, a matter for the shareholders Going back to those initial undertakings about legally enforceable commitments in the letter, the Secretary of State indicated in his letter his wish to see Melrose making those other commitments, to which I referred in the main letter, in good faith. I hope the company will stick to that. Since the noble Lord asked particularly about R&D and training, the commitments about R&D are listed in its letter in the paragraphs about enforceable undertakings, which state: "Melrose will at least maintain GKN’s current level of expensed research and development investment equal to 2.2% of sales over the financial years 2019, 2020, 2021, 2022 and 2023" This is a legally enforceable commitment As I said, I am limited in what I can say, and I want to be very careful about what I do say and how far I go because the Secretary of State has to look at this thereafter. I will leave it there and take up that rather technical point that the noble Baroness made about arbitration houses—