Turnaround firm Melrose has come under more criticism from a parliamentary committee today, as it postponed formalising any promises it would make if it succeeds with its £8.1bn hostile bid for engineering giant GKN.
In a letter to the Business, Energy and Industrial Strategy (Beis) select committee, dated yesterday, Melrose set out “initial details” about the areas it intends to cover with legally binding post-offer undertakings (POUs).
But the Beis committee chair Rachel Reeves criticised Melrose for not going far enough, after she demanded at a hearing last week that the firm clarify its intentions through POUs.
“Melrose have given a sense of the likely direction of their post-offer undertakings, but there is a still a lack of detail in their commitments on investment and jobs and these currently fall short of being legally enforceable,” Reeves said.
Melrose’s chief executive Simon Peckham reasoned that the POUs must be “specific and precise, objective, legally enforceable” and that due to GKN’s opposition to its bid, it had received “lack of access to GKN”.
But the areas which would be included in intended POUs included retaining GKN’s brand name and UK headquarters, maintaining research and development spend at at least 2.2 per cent of sales, and working with supplies and customers to boost the UK’s industrial base.
Melrose also “outside the POU regime” clarified its intentions for GKN’s pension schemes, after the pension trustees earlier this week said Melrose had failed to address “key issues” with regards to pension funding.
“Following the acquisition of GKN, the enlarged Melrose group will be able to offer further protection to scheme members by adding circa £4bn of assets that GKN alone cannot,” Peckham wrote.
He added that the firm would invest £150m in GKN’s UK pension scheme within 12 months of acquisition, and increase annual contributions until the schemes are fully funded.