MPs have urged the business secretary to block the proposed hostile takeover of GKN (LON:GKN) by Melrose Industries (LON:MRO), the Financial Times has reported. The news came as Moody’s moved to downgrade its outlook on GKN from stable to negative.
GKN’s share price has been steady in London this morning, having added 0.77 percent to 429.20p as of 09:38 GMT. The shares are marginally underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.97 percent higher at 7,185.08 points. GKN’s shares have added more than 15 percent to their value over the past year, as compared with a 2.3-percent drop in the Footsie.
MPs urge UK to block bid
The FT reported yesterday that 16 MPs from three UK political parties had written to business secretary Greg Clark calling for him to block the proposed hostile takeover of GKN by Melrose and prevent a ‘world class’ industrial company from being ‘dismembered’.
“We believe the takeover should not succeed,” they said in the letter, arguing that the FTSE 100 group was not in a ‘turnaround situation’ and instead produces good results in most of its operations, with pre-tax profits up by 125 percent in its most recent results.
The MPs have urged Clark to use section 58 of the 2002 Enterprise Act, which allows the government to intervene in mergers if they raise public interest concerns such as national security. Some officials in Whitehall, however, have suggested to the newspaper that there is scant evidence that GKN’s defence work would justify this.
Moody’s lowers rating on GKN
The FT further reported that Moody’s had decided to downgrade the blue-chip engineer from stable to negative, noting that the company’s plan to split the business would make it ‘challenging’ for GKN to retain an investment-grade credit rating.