National security concerns prompt government to scrutinise Melrose's hostile £7.4bn bid for GKN

 
Lucy White
ISRAEL-MILITARY-GRADUATION
The F-35 fighter jet, for which GKN makes parts, is used by militaries around the world (Source: Getty)

National security concerns mean turnaround firm Melrose will now have to jump another hurdle if it is to proceed with its £7.4bn bid for engineering giant GKN, as the government revealed that it is scrutinising any potential deal.

Melrose was already battling with GKN's board as the bid went hostile, and has been attempting to convince shareholders that its plans to create value at the FTSE 100-listed company are more feasible than GKN's own.

Read more: GKN hits back at Melrose's "misleading" £7.4bn offer

But a spokesperson for the Department for Business, Energy and Industrial Strategy (BEIS) hinted today that government ministers may yet intervene in any prospective deal, which is possible on the grounds of national security. GKN's aerospace branch is heavily involved in defence projects, including the manufacture of parts for the UK's F-35 stealth fighter and the US's new main B-21 bomber.

"While this is a commercial matter for the companies involved, government is closely monitoring the situation. Business secretary Greg Clark has spoken on an impartial basis to both companies," said a BEIS spokesperson.

Read more: Melrose meets with GKN shareholders to pursue £7bn bid, as interest from buyout house Carlyle could prompt a bidding war

GKN has slammed Melrose's approach for the company as being "misleading" and offering a "fake premium". It has instead told shareholders it can create value by splitting the aerospace and automobile divisions.

In a well-timed announcement today, GKN said that its order book for electric car technologies hit £2bn in 2017 after "significant contract wins". It added that sales, which were previously forecast to rise from £33m in 2017 to £200m in 2020, are now expected to increase more than eightfold to £275m.

The company said this was due to a strong focus on research and development. In response, Melrose said it welcomed the news and that the announcement was "part of the justification of the premium we are offering to GKN shareholders".

Read more: GKN shares surge as it rejects a takeover offer and reveals it will split in two

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