As Dowlais debuts, fears over Melrose’s GKN takeover look unfounded
T o very little fanfare, London’s stock market on Thursday gained a £1.6bn engineering company that supplies 90% of the world’s vehicle manufacturers and is top dog in the specialised field of drive systems.
The lack of buzz was perhaps understandable. The company’s name – Dowlais – may be new, but the business itself is merely a demerger from FTSE 100 firm Melrose Industries. Its main operation is GKN Automotive, one half of the GKN engineering empire that fell to Melrose in an acrimonious £8bn takeover battle in 2018.
Remember the heat, fury and headlines that were generated by the great Melrose-GKN showdown? The bidders were billed in some quarters as asset-stripping financial engineers who would enrich themselves by wrecking 259-year-old GKN. A committee of MPs grilled Melrose’s bosses about the future of UK engineering and national security implications.
On the other side, GKN’s directors turned somersaults to try to escape the bidder. They rewrote strategy on the hoof to propose a break-up and a merger of GKN Automotive with US company Dana. It didn’t work. Melrose won the shareholder vote narrowly, with the business secretary of the day extracting a few (modest) undertakings covering research and development and continued UK presence.
The Dowlais demerger, then, is a moment to ask whether the 2018 fuss and fears were justified. The answer is surely no. Melrose’s crew do indeed pay themselves megabucks when their deal-making delivers the financial goods, but they can’t really be accused of slash-and-burn tactics at GKN.
Ex-workers in ex-GKN plants that wereclosed in Erdington (automotive) and Kings Norton (aerospace) may understandably disagree, but life under an independent GKN might not have been markedly different.
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