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MPs call on Melrose to seek approval from pension regulator for ?7.4bn GKN takeover

MPs are calling on Melrose to voluntarily submit its takeover plan for GKN to the Pensions Regulator for approval to show the security of the retirement scheme will not be harmed by the deal.
The call – from the work and pensions select committee – comes ahead of today’s hearing by the business, energy and industrial strategy (BEIS) committee into the impact the ?7.4bn hostile takeover could have on UK industry if it is successful.
Frank Field, chair of the pensions committee, wrote to the Pensions Regulator asking for its assessment of the takeover – and GKN’s defence plan – and how they could affect the pension scheme, which trustees say has a ?1.1bn deficit, based on how much would have to be invested in government bonds to plug the funding gap.
Melrose’s takeover plan would raise leverage of the combined company to 2.5 times net debt to earnings, up from GKN’s current 0.8 times level. A higher gearing is seen as more risky, which could impact the pension scheme.
The regulator wrote to Mr Field saying that “from the outset we have been concerned the increased leverage in Melrose’s proposed takeover could have a detrimental impact”.
In numbers | GKN
Mr Field called on Melrose to seek approval from the regulator – something which is not mandatory. He added: “Pensioners would be surprised to know a pension scheme could be offloaded to someone clearly less equipped or inclined to support it without the regulator having a say. 
“Melrose claims an impeccable record in protecting pension rights. The surest way to demonstrate its commitment in this case would be to apply voluntarily for clearance.”
Melrose said it had “consistently strengthened the pension scheme covenants” of other businesses it had acquired. A spokesman for the company added: “Every time we have disposed of a business we have left it free from deficit.”
The BEIS committee will take evidence from executives at Melrose and GKN, as well as union leaders on Tuesday.
Ahead of the session, committee chair Rachel Reeves called GKN “an important company domestically and globally”.
MPs call on Melrose to seek approval from pension regulator for ?7.4bn GKN takeover

MP Frank Field, chairman of the Work and Pensions Select Committee
She added: “Hostile takeover attempts of major UK companies do not happen very often. There are serious matters at stake not only for the future of GKN and of highly skilled jobs at the company but also for the UK’s engineering, science and research base. It also puts into focus our industrial strategy and the objectives of boosting productivity, growing companies and ensuring long-term investment in industries of strategic importance.”
BEIS also released correspondence ahead of the session, including a letter from Business Secretary Greg Clark which revealed he is taking a “very close interest “ in the proposed deal. He added that although he has the power to intervene in the deal on public interest grounds, he had to act impartially, saying it was “inappropriate” to comment further.
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