March 6, 2018 / 3:21 PM / 3 months ago

UPDATE 1-UK's Melrose might offer commitments on GKN's future after a takeover

* Hostile offer by Melrose has been rejected by GKN

* GKN has countered with plan to split the firm

* British engineer involved in U.S., UK defence projects

* Lawmakers fear Melrose may sell GKN units to foreigners (Adds quotes and background to takeover bid)

By Ben Martin

LONDON, March 6 (Reuters) - Melrose Industries will consider making binding commitments about the future of GKN if it succeeds in its bid to take over the British engineering firm, the chief executive of the turnaround specialist told lawmakers.

The 7 billion-pound hostile offer for GKN, which supplies components for the Black Hawk helicopter and Eurofighter Typhoon, has faced mounting political scrutiny in Britain.

Some lawmakers say jobs and GKN’s pension scheme may be at risk and that Melrose could break up the engineer and sell parts to foreign buyers, potentially compromising British and U.S. national security because of GKN’s work on defence programmes.

But Melrose CEO Simon Peckham told British lawmakers on parliament’s Business, Energy and Industrial Strategy (BEIS) Committee that Melrose would not seek to offload GKN businesses to a buyer who could be deemed inappropriate.

He said Melrose could make binding commitments, known as post-offer undertakings (POUs) under Britain’s Takeover Code, about its ownership of GKN if its cash-and-shares bid was successful.

“We will look at what POUs can be given at the moment our bid gets to a stage where that could happen,” Peckham said, adding that these pledges could cover areas including research and development at GKN and maintaining the engineer’s brands.

A group of 16 British politicians wrote to Greg Clark, the business minister, on Monday to urge the government to use its powers to intervene in the Melrose takeover on public interest grounds, citing potential national security issues.

“We are not going to sell GKN military protected assets to anyone who is not an appropriate buyer,” Peckham told the BEIS committee.

GKN Finance Director Jos Sclater, who also appeared before the committee with GKN Chief Executive Anne Stevens, said the British engineer’s “U.S. military presence is a lot more significant than our UK presence”, when pressed about the security implications of a Melrose takeover.

Frank Field, the chair of the parliamentary work and pensions committee, has urged Melrose to seek clearance voluntarily from Britain’s pension regulator for its GKN bid.

Peckham told the BEIS committee that Melrose would seek fresh legal advice on the matter.

The turnaround specialist has been asked to report back to the lawmakers on its efforts to secure a greenlight from the pensions regulator and to update the committee on the areas where it might offer POUs.

GKN has sought to fend off Melrose’s unwanted approach by outlining its own plan to split its main aerospace and automotive parts divisions into two separate companies, and to sell off its powder metallurgy unit.

This has spurred approaches from other firms interested in GKN’s businesses including U.S. group Dana, which is discussing a potential tie-up with the British engineer’s autos division.

GKN’s chief executive declined to tell the BEIS committee when the discussions with Dana started but did confirm that the British engineer had received “many” approaches and held “many” conversations. (Reporting by Ben Martin Editing by Jason Neely and Edmund Blair)

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