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Melrose bosses to review controversial ?170m bonus plans after revolt

Melrose's bosses have backed down over their controversial potential ?170m bonus deal following the turnaround group’s takeover of GKN.
In its annual meeting statement, Melrose said that “given the recent acquisition of GKN, the board intends to review the existing Melrose remuneration arrangements”.
Despite this, investors still fired a warning shot at the annual meeting, with almost a quarter of the votes cast going against the remuneration report. Of the 69pc of investors who voted, 22.9pc of them were against the pay and bonus structure.
Melrose’s four top executives - Simon Peckham, David Roper, Christopher Miller and Geoff Martin - masterminded the ?8.1bn hostile takeover of GKN, narrowly winning the investor vote in March with 52.5pc backing after promising to improve the car and aircraft parts manufacturer's performance.
Melrose bosses to review controversial ?170m bonus plans after revolt

Christopher Miller, chairman of Melrose, hopes to improve the performance of GKN

Credit:
Geoff Pugh
The executives each received more than ?40m last year as a five-year bonus plan paid out and are in line for another pay bonanza if they deliver on their turnaround plans for GKN.
The team will receive 7.5pc of any increase in the value of the combined business over and above a 5pc annual "hurdle" to account for inflation lifting the value of the company - a plan that pays out in 2020 and was backed by Melrose investors at a special meeting last year.
However, the huge rewards have raised questions in some circles. Influential shareholder adviser Glass Lewis told investors to oppose Melrose’s remuneration scheme at the annual meeting, which it referred to as “excessive payouts”, a view echoed fellow adviser PIRC.  
Melrose said it would "consult with shareholders about pay in the coming months". The current pay deal has been in place for over a decade.
Melrose's strategy involves buying underperforming engineering businesses, improving them and then selling them on. It has been labelled an "asset stripper" by some but its plans have delivered huge returns for investors - some ?4bn to date.
Mr Miller, the group's chairman, said he was “excited by what is in store for Melrose over the next few years”.
He added: “We look forward to working with the GKN employees to transform the prospects of the businesses through significant investment.”
Melrose bosses to review controversial ?170m bonus plans after revolt

GKN makes parts for aircraft and cars

Credit:
Bloomberg
While the focus has been on the acquisition of GKN, which propelled Melrose into the FTSE 100 index as it went from being a mid-market investment vehicle to global business, the update also revealed progress on its previous acquisitions.
Melrose said its last purchase, US group Nortek, which makes air conditioning and security systems, was seeing significant product development and investment that would result in new products as well as efficiencies. 
The company also confirmed it was in the “initial stages” of a $350m-plus sale of its Ergotron business, which makes ergonomic office furniture.
Brush, the maker of generators that Melrose acquired as part of its ?1bn purchase of FKI in 2008, remains on the company’s books. While the rest of FKI has been sold for between 2.5 and three times the outlay, Melrose held on to Brush amid a downturn in the energy market.
In the update, Melrose said Brush “remained an important focus”, and it had “continuing plans to increase its value and prospects”.
Melrose bosses to review controversial ?170m bonus plans after revolt

Melrose's Brush unit has been hit by the downturn in the energy market
At the height of the GKN bid battle, Melrose revealed in a trading update that it was starting redundancy consultations that would see almost a third of the 720 staff at Brush's plant in Loughborough go as it tried to stem the company’s continuing losses.
The news was jumped upon by unions questioning whether Melrose would be a good owner for GKN, which has about 6,000 staff in the UK.
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