The Guardian view on hostile takeovers: creating value for bankers | Editorial
In 2016 Theresa May launched her campaign to become Conservative party leader and Britain's prime minister with a speech that promised to do "something radical" about corporate takeovers. She warned that "transient shareholders " are not the only people with an interest when firms are sold or close. Workers have a stake, local communities have a stake, and often the whole country has a stake." Fast forward 18 months and Mrs May, drained of authority, has no proper industrial strategy.
Yet a real test of her words has emerged in the City, where a 7bn hostile battle appears to pit financial engineering against real engineering. Melrose, whose holding company is staffed by about 50 executives skilled in the arts of law and finance, has launched a corporate raid for GKN, a British manufacturing giant employing 56,000 people and a world leader in automotive and aircraft technology. Melrose wants to purchase GKN by borrowing 1.4bn and offering that as a sop to shareholders. If successful, that loan will be added to GKN's debt, diverting cash away from useful investment and obligations to its 32,000 pensioners. This doesn't seem to trouble Melrose's top four bosses. They plan to split up and sell parts of the industrially vital business, no doubt minimising taxes and cutting costs, within five years. If successful, the bosses could share an absurd 285m in bonuses.
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