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GKN's largest customer tolls death knell for Melrose deal
GKN's largest customer, Airbus, has suggested it would withdraw custom from the FTSE 100 engineer in the event of the proposed hostile takeover by Melrose International.
Airbus, from which GKN generated 20% of its aerospace sales last year, expressed caution about turnaround specialist Melrose's focused on the short term.
"The nature of our industry is one that requires a commitment to long-term investment and strategic vision," said Tom Williams, chief operating officer of Airbus's commercial aircraft arm.
"The industry does not lend itself to shorter-term financial investment which naturally reduces R&D budgets and limits vital innovation," he added, in remarks to the Financial Times.
"It would be practically impossible for us to give any new work to GKN under such an ownership model when we don't know who will be the long-term investor."
Earlier this week, Melrose upped its offer to 467p per share, or £8.1bn, from £7.4bn and sought to reassure MPs about the proposed takeover by proposing binding commitments on research, pensions and other matters of political concern. GKN makes technology used in the F-35 fighter jet
The turnaround specialist said it had not viewed GKN's books but that it intended to make binding post-offer undertakings covering the engineering company's head office, research spending, suppliers and pensions.
In a statement on Thursday, GKN chairman Mike Turner said the comments from Airbus back up the board's belief that Melrose "is not an appropriate owner of GKN" and that the "short-term business model is inappropriate for GKN's customers and investors".
"As we have previously stated, and as these comments from Airbus reinforce, winning new business in our markets would be more difficult if customers were uncertain as to the identity of their future long-term partners."
The bid battle-cum-war of words started on 12 January and has become highly political. Jeremy Corbyn, the Labour leader, called Melrose an asset stripper out to make a quick buck at the expense of UK industry. Prime Minister Theresa May has said the government will monitor the bid after MPs raised security concerns about a buyout.
The deadline for accepting the final offer by Melrose, which would see GKN shareholders own 60% of the company and receive £1.4bn, is Thursday 29 March at 1300 GMT.
Melrose's sweetened offer came after GKN announced on Friday that it had agreed to combine its automotive business, Driveline, with US-based Dana in a deal valued at around $6.1bn.
Analysts at Olivetree Financial calculated on Wednesday that Melrose's ability to attain a 50% acceptance from GKN investors "isn't necessarily the slam-dunk that a decent swathe of the market currently assumes".
Analysis of the shareholder register concludes that 49.59% of the GKN register "is currently motivated to tender to Melrose", and 50.41% are unclear. With Dana management in London to sweet-talk investors, "it would appear there is much left to play for here".
GKN's shares were down almost 2% to 429.8p on Thursday, while Melrose was down less than a penny to 220.6p.