Sir Desmond Swayne TD MP

Sir Desmond Swayne TD MP

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Keeping the Goose Laying

31/03/2018 By Desmond Swayne

I have had several emails from constituents who have worked themselves into quite a state over the takeover of the engineering firm GKN by Melrose. Some of my correspondents have got the wrong end of the stick, likening it to the takeover of Cadbury by Kraft back in 2010, they appear not to have spotted that Melrose is a UK enterprise just as much as is GKN.

I have not been able to get excited about it. GKN has been a great British enterprise with an illustrious history, but with respect to the takeover bid, I think it had it coming.
For the last few years the performance at GKN has been less than impressive. The impression was of a company coasting, event slacking, and senior management lacking focus and energy.
Melrose, on the other hand, has performed formidably and has a record of refocusing enterprises on their core business and sharpening the management. As for the fear that parts of the business will be sold off, there is nothing unusual about that, it can often be the sensible thing to do, and apparently GKN was planning to do that itself anyway

One great British enterprise bought-up by another successful British enterprise, is not a great headline, that is why it has been dressed up with all that pejorative stuff about ‘asset-strippers’ and ‘greedy city hedge funds’.
My perspective different: it’s one of free markets exercising a discipline that keeps companies and their managements on their toes, performing at the top of their game.

Just suppose however, that Melrose had been a foreign-owned undertaking. Would my attitude be different?
It would not. I believe in free trade and the free movement of capital, from which we prosper more than most: In the UK we own more overseas assets per head of population than almost any other country in the world. The profits from which flow back into UK coffers. It is something we have been doing for generations. As the greatest of ‘offenders’ we are hardly in a position to complain when somebody else buys-up something British.

I felt that all the angst about Cadbury was rather misplaced. Traditional British chocolate manufacturer, still informed by the social values of its Quaker founders, swallowed-up by multinational giant. Not quite!
Remember, whilst Cadbury was indeed once a traditional Quaker confectioner, it had itself become a voracious and acquisitive predator, it was after all actually Cadbury-Schweppes.

If companies want to fund their expansion and investment in one of the most effective ways available, raising the capital by selling shares, then we must accept that shareholders have a right to realise their own investment and sell the shares when, and to whom they choose. To seek to interfere with that right will drive capital from our shores and kill the goose that is laying the golden eggs.

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