Turnaround specialist Melrose Industries' £7bn hostile bid for defence contractor GKN could pose a threat to US national security, according to union Unite.
Unite said on Monday that it has written to the Committee on Foreign Investment in the United States (CFIUS), the key body on US investment decisions, and to US defence secretary General Mattis to outline its concerns.
Over the weekend, it emerged that senior US politician Neal Dunn has already written to the CFIUS to voice his worries about the Melrose bid for GKN, which is a strategic supplier to secret programmes for the US air force, as well as aircraft and Chinook and Blackhawk helicopters.
Dunn noted that Melrose has no track record in defence contracting or relevant high-technology businesses, adding that the acquisition plan revealed “prioritisation of operating cash generation”. He said that if the deal is allowed to go through, Melrose's strategy would undermine long-term investments in R&D and secure supply chains, which are critical to major defence platforms GKN supplies.
Unite assistant general secretary Steve Turner wrote in a letter to CFIUS's staff chairperson, Stephen Hanson: “Future ownership fears are genuine and should lead to concerns with both prime contractors and governments over the security of defence intellectual property, as well as future capacity to develop the necessary long-term investments, partnerships and innovative engineering design and manufacture capability to support our current – let alone future – national security requirements.
“Melrose is a self-declared 'turnaround company' focused on short-term shareholder value with the objective of disposing of assets within three-five years of acquisition. The proposed offer is based on share value and not industrial strategy, with Melrose levering a healthy GKN balance sheet in order to fund 'exceptional dividends' to shareholders. The resulting debt burden on GKN will result in a break-up of the company and rapid sale of core divisions essential to growing synergies and innovative engineering solutions in automotive, powder metallurgy and aerospace (including defence).”
Turner went on to point out that Melrose has no experience of operating tier 1 contracts in defence, aerospace or automotive, and no record of fulfilling necessary commitments to the long-term investment necessary to innovate either alone or in alliances and joint ventures.
“Trusted relationships, secure long-term alliances and joint ventures that share the costs of investment and innovation are of course central to the design, engineering and manufacture of our defence requirements as well as wider requirements in support of our national security.
2We have genuine concerns over the future of investment in innovation, research and development, design and engineering capacity as well as fundamental concerns over the future ownership and governance structure of a 'stripped out' business. We believe you will share these concerns.”