The Pensions Regulator (TPR) has expressed concerns that the hostile bid for GKN by US engineering firm Melrose could damage the British company’s pension scheme.
In a letter to the chair of Parliament’s Work and Pensions Committee, Frank Field, TPR said it is “concerned that the increased leverage involved in the proposed takeover by Melrose is likely to have a detrimental impact on covenant”, denting GKN’s ability to meet its pensions obligations to defined benefit pensioners.
Melrose is currently in the middle of a hostile £7.4bn takeover bid for British engineering stalwart GKN, which has raised intense political objections from both government and opposition MPs.
MPs on the committee have summoned management from both firms to face questions on their plans. Objections to the deal have centred on GKN’s status as a British military supplier, prompting national security concerns as well as fears for the UK’s status as a manufacturing nation.
TPR noted it has written to Melrose to ask the firm to make a clearance application for its plans. It has been in contact with the firm and has met the trustees of the GKN pension fund.
However, clearance is a voluntary process, and TPR has no powers to enforce any decision that a plan is not valid or to block a takeover.
Field said: “Melrose claims an impeccable record in protecting pension rights. The surest way to demonstrate its commitment in this case would be to apply voluntarily for clearance”.
Field added he believes a “proportionate, mandatory clearance check” on pension scheme plans ahead of takeovers would be the best option.
He said: “I think pensioners would be surprised to know that a pension scheme could be offloaded to someone clearly less equipped or inclined to support it without the regulator having a say.