Airbus warns on new business Melrose takeover bid for GKN

Airbus has flown to the aid of engineering group GKN (Frankfurt: 694194 - news) 's board, saying it could not give new business to the company if a hostile takeover bid succeeds.

GKN is opposing an £8.1bn attempt by turnaround specialist Melrose (LSE: 136541.L - news) to woo its investors, arguing it undervalues the company.

The proposed "final offer" from Melrose is also facing opposition from MPs (BSE: MPSLTD.BO - news) amid fears for what a takeover would mean for staff, pensions and investment at GKN.

Melrose has pledged to maintain spending at least at current levels and denied any suggestion of a short-term approach.

The opinion of Airbus carries weight as it is currently GKN's biggest customer - making parts for wings primarily and accounting for 20% of its aerospace sales last year.

Airbus chief operating officer Tom Williams said: "The industry does not lend itself to shorter term financial investment which naturally reduces R&D (research and development) budgets and limits vital innovation.

"It would be practically impossible for us to give any new work to GKN under such an ownership model when we don't know who will be the long-term investor."

GKN chairman Mike Turner responded: "The comments from Airbus that stress the need for long-term investment and strategic vision in our industry emphasise our firmly held belief that Melrose is not an appropriate owner of GKN.

"Its management lacks the relevant experience and its short-term business model is inappropriate for GKN's customers and investors."

GKN has moved to lure investors away from interest in the Melrose offer by concluding a deal of its own to merge its automotive business Driveline with US firm Dana.

The FTSE 100 company's shares closed 1.7% lower on Thursday.

Melrose's chairman, Christopher Miller, responded to the intervention by AIrbus by saying: "We will be delighted to explain to all customers and stakeholders why Melrose's 'invest as if we were to own the business forever' approach is the right way forward for GKN.

"We are certain that GKN's new strategy of hasty short term business break up will not benefit the long term requirements of customers."