The trustees of the GKN pension schemes are yet to receive proposals from Melrose that “address the key concerns that the trustees have raised”, they have said in a statement.
It follows a statement issued by Melrose yesterday that included a final offer of £8.1bn in its hostile takeover bid. On GKN’s intentions to sell some of its businesses to Dana, Melrose said that it would leave behind GKN Aerospace, “burdened by a disproportionate, and very substantial, amount of gross pension liabilities, inappropriate for the size of the underlying business”.
Melrose said it has been an “impeccable steward of the pension schemes of the companies it has owned” and is committed to looking after all stakeholders.
“We have strengthened every single pension scheme we have acquired. We are pleased to confirm that we are in constructive talks with the GKN Pension Scheme Trustees. We have already committed to make annual payments to the GKN pension schemes at a level greater than that which GKN pays into the schemes today, over and above the substantial voluntary cash contribution of £150m that we announced previously,” it said.
However, in a statement issued last night, the trustees of the GKN schemes said: “The trustees have noted the comments made today by Melrose in relation to the pension arrangements agreed as part of the GKN Driveline / Dana combination. Under these arrangements, GKN will make very substantial cash contributions to the schemes which will be sufficient to make the schemes fully funded on an IAS 19 basis.
“The trustees have taken extensive financial, legal and actuarial advice in relation to these arrangements and have satisfied themselves that they provide appropriate mitigation to the Schemes and that they are in the best interests of the Schemes’ members.
“The trustees have had a number of discussions with Melrose but have yet to receive proposals which address the key concerns that the trustees have raised. The trustees would very much like to progress these discussions.”
Speaking at a BEIS committee hearing, 6 March 2018, GKN group finance director Jos Scalter said the schemes saw a contribution injection of £250m in 2017 as a “bullet payment” on top of normal contributions to the scheme.
“We put £250m to the pension scheme and dividends to shareholder was £150m, so I think we’ve been extremely responsible on the way we’ve dealt with our pension scheme.”
Addressing why the deficit has increased, Scalter explained that as a result of Brexit, interest rates inevitably fell, which lead to the increased pension deficit.
“As the pension scheme has grown we have wanted to outgrow the pension scheme by continuing to grow the company, which we’ve done successfully. The good news is that last year we made £680m of profit, which is easily enough to cover the contributions to the pension scheme,” Scalter surmised.