By DebbieH 20 Mar 2018 7 min read

Airbus gives stark warning to UK engineering giant

In a dramatic move, Airbus has said that it would not be able to continue working with engineering group GKN if it was bought by Melrose.

The eyes of the UK engineering industry have been following the progress of a hostile takeover bid from turnaround specialist Melrose. GKN has almost 60,000 employees overall, 6,000 of these are in the UK. The group makes key parts for Airbus which accounts for 7% of its sales and is its biggest customer. GKN’s other customers include Boeing, Volkswagen and Ford.

Tom Williams, Airbus’ chief operating officer of its commercial aircraft division, said that it would be “practically impossible” to give GKN any new work if Melrose was successful in its takeover bid. Williams said: “The nature of our industry is one that requires a commitment to long-term investment and strategic vision.”

Following these comments, Mike Turner, GKN chairman, said: “The comments from Airbus that stress the need for long-term investments and strategic vision in our industry emphasise our firmly held belief that Melrose is not an appropriate owner of GKN.”

The chairman of Melrose, Christopher Miller, hit back at these comments stressing that his company invests in businesses “for the long term”. He added: “Under Melrose, shareholders and customers will be able to enjoy a considered and longer-term process of value creation, investment and business enhancement, which is clearly not an option under continued GKN ownership.”

The opposition from Airbus is a blow for Melrose as GKN’s biggest customer. However, Melrose is also facing opposition from MPs and trade union Unite. Following a meeting with Melrose on Monday, the union said it had no confidence in the takeover attempt given the company’s history of selling its acquired businesses on after three to five years.

If the proposed deal goes ahead, GKN’s investors who would end up owning 60% of Melrose. Shareholders would reportedly receive 1.69 Melrose shares and 81p in cash for each GKN share held. With investors backing both sides, the outcome of the bid remains unclear.


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