MPs urge ministers to block GKN takeover on national security grounds

MPs have asked the government whether it will consider using powers to block takeovers for national security reasons to stop a hostile bid for the engineering company GKN, which makes technology used in the F-35 fighter jet.

GKN has rejected as “derisory” a £7bn offer from the turnaround specialist Melrose, after it appealed directly to shareholders rather than seeking consent from the company’s management.

Rachel Reeves, the Labour MP who chairs the business, energy and industrial strategy select committee, has written to the business secretary, Greg Clark, to ask whether the government has considered using its powers to block the deal.

The appeal follows an assurance from Theresa May earlier this week that the Department for Business, Energy and Industrial Strategy (BEIS) would be “looking closely” at the proposed takeover.

In her letter to Clark, Reeves asked for “more detail about the nature of the discussions you have had with the chief executives of both GKN and Melrose”.

“In particular, have you established whether there are sufficient grounds for you to intervene in the public interest on the grounds of national security?” she wrote.

She also asked whether Clark, who is weighing up adding to Whitehall’s powers to block takeovers, to consider “widening the scope” for government intervention.

“For example, in other countries, such as Germany, I understand that the law requires a qualified majority of 75% of votes cast for certain actions associated with a hostile takeover,” Reeves wrote.

She also asked whether the government would reopen proposals to limit the ability of shareholders to vote on takeovers if they have only recently bought shares.

Reeves referred to the controversial £12bn takeover of Cadbury by Kraft in 2010, when hedge funds and other speculators were accused of buying up shares in the chocolate-maker so they could vote in favour of a deal and make a quick profit.

The Labour MP asked for a response by 20 February. BEIS had not responded to a request for comment at the time of publication.

Rebecca Long-Bailey, the shadow business secretary, has urged Clark to stop the takeover, which she said would “risk weakening our industrial base and diminishing our national defence capabilities”.

The former business secretary Vince Cable warned earlier this week that Melrose was an “asset-stripper” whose bid for GKN posed a “serious threat” to the UK industrial strategy.

The Liberal Democrat leader’s comment is understood to refer to Melrose’s strategy of taking over underperforming companies and stripping out inefficient layers of management or selling off assets.

A deal for GKN would be its largest and most controversial to date, given the takeover target’s work in areas that overlap with the UK military.

GKN works in automotive, metallurgy and aerospace, including sensitive areas such as technology for the US defence company Lockheed Martin’s F-35B fighter jet, 138 of which have been ordered for the Royal Air Force.

The company, which used to be known as Guest, Keen and Nettlefolds and traces its history back to 1759, has struggled in recent years and issued a profit warning after a downturn in its US aerospace business.

GKN has proposed splitting into two rather than accepting the offer from Melrose, whose chief executive, Simon Peckham, has said the decision is “down to the shareholders now”.

Melrose, founded in 2003, said it would not pursue a “hasty” split of the automotive and aerospace divisions, but would sell small parts of GKN to “simplify and declutter” the business.

In a proposal document sent to shareholders, Melrose insisted it would take its national security obligations seriously if the cash-plus-shares offer succeeds.

“As an established UK public company with relevant experience, we fully recognise our requirements in this regard and have no doubt that this is completely compatible with our approach,” the company said.