The prospect of one of Britain’s longest-lived global champions opting for a European HQ because of Holland’s better protection against short-termist hostile takeover bids poses challenges for Britain’s new industrial policy (Look closer to home for an explanation of Unilever’s Rotterdam move, 16 March).
Lever, Reckitt and GKN are today’s only top 50 British companies surviving from 1905. Lever merged with Margarine Unie in 1930, forming Unilever. Reckitt merged first with Colman then with Benckiser, from Holland, forming Reckitt Benckiser in 1990. While Reed Elsevier/RELX has so far been happy to invest in Britain, it, Reckitt Benckiser and even Royal Dutch Shell could soon face similar dilemmas to Unilever’s. GKN, established in 1759, is today under hostile attack from Melrose, an aggressive financial restructurer whose market capitalisation jump has come in just the last two years. There is a reason why it is one of the most shorted major stocks on the market: it made losses in 2016, its most recent full accounting year, and its gearing has fluctuated wildly over its short history.
Last week the Finns, like the Dutch, subtly intervened to protect Stora Enso, which dates back 700 years. AstraZeneca, recently attacked by Pfizer, must similarly wonder whether it is better based in Sweden or Britain. Ironically it was Germany, not Britain, that stepped in to protect BAE. And now it is France’s Airbus warning that GKN could lose its crucial aero parts work should Melrose’s hostile acquisition win out. Warren East warned this month that Rolls-Royce was on the brink of bankruptcy when he took over, while GKN has at least been consistently profitable, returning averaged returns on capital of 14% over the last five years – every bit as good as Melrose whose results have wobbled into losses.
No one is advocating old-style support for lame ducks, but isn’t it time for Britain to show more support for its few remaining global champions? If not, post-Brexit, we may wake up to find that most have already walked across the Channel. Not the best start for “Global Britain”.
Professor of corporate strategy, University of Edinburgh Business School
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