Westland on run in aerial skirmish: The chief executive accepted that GKN would one day seek control. Now the inevitable has happened, he is not so sanguine

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The Independent Online
'I DO NOT think GKN will bid for us until things are going very well and I have some successes under my belt.' These were the words of Westland Group's chief executive, Alan Jones, soon after he joined the company in 1989. And in a moment of remarkable candour, he added: 'I would hope GKN would then find me useful.'

Mr Jones, your moment has arrived. This week, GKN bought the Westland shares held by United Technologies Corporation of the US to take its total stake up to 45 per cent. Then it slapped in a 290p-a-share bid for the rest. The 320p market price suggests there may be more to go for, but GKN is strongly placed.

Many defending chiefs in similar circumstances would be looking to their service contract and share options - worth a possible pounds 2m in all in the case of the 53-year-old Mr Jones.

But GKN is run by the courteous Sir David Lees, who has adorned his Mayfair office with fine paintings and a silver service and employs a pin-striped butler.

In such graceful surroundings it comes as no surprise that Sir David, the 57-year-old son of a rear admiral and also director of the Bank of England and leading light of the Confederation of British Industry, should not only regret having to make a hostile bid for Westland but plans to invite his adversary on to the GKN board with his share options intact.

'But I'm due to become chairman of Westland next week,' Mr Jones protested, 'and unless I'm very much mistaken, I don't think Sir David is about to make me chairman of GKN.' No, that job is already taken, and even Sir David's good manners do not extend to putting his job on one of his silver salvers as part of the welcome.

The bid was hatched last November when Bob Daniell, boss of UTC, told Sir David that the American group wanted to sell its Westland holding.

UTC, the maker of Sikorsky helicopters, had acquired its stake following the political row over whether Westland should come under the Americans' control or join a European consortium under Aerospatiale of France. The row led to the resignations of Michael Heseltine and Sir Leon Brittan from the Cabinet in 1986.

The eventual deal was a compromise, in which UTC would have to make do with 19 per cent while another 26 per cent or so was held by Fiat of Italy and Hanson of the UK.

But within two years Fiat and Hanson had sold to GKN. And although Mr Jones professed surprise at last week's news, it was obvious from then on that a bid for Westland was only a matter of time - as his comment five years ago made plain.

As Sir David put it: 'We were either going to bid or sell - and we were only going to sell to another bidder.' GKN and UTC gave one another first call on each other's shares.

GKN, the former Guest Keen & Nettlefolds, was for many years a Midlands metal- basher best known for making motor components. But, as Britain's industrial base was eroded and the domestic car industry shrank, the group played up its long-standing defence business. It used its auto knowhow to produce armoured personnel and weapons carriers and ambulances.

By the time the Westland crisis was splitting the Cabinet, GKN was developing its highly successful Warrior armoured fighting vehicle, which was a star performer in the Gulf war three years ago.

So it was natural for the company to covet other makers of light vehicles capable of carrying arms, which happens to have been one of the few growth areas in defence since the outbreak of peace between the West and the old Soviet bloc. Helicopters fit the bill nicely.

Like GKN's existing range, they meet current military fashion for ground troops supported by light and flexible assault vehicles - items that fall conveniently within the often-stretched budgets of Middle Eastern and Third World countries seeking some hardware to show off on high days and holidays.

There seems to be a fairly even division among experts over whether there is anything to be gained by GKN marketing packages of helicopters and wheeled weapons carriers.

However, there is a tangible gain to be accrued from using Westland's predominantly UK earnings to mop up GKN's pounds 133m of unused advance corporation tax.

That puts in perspective GKN's apparent generosity in offering a price equal to 25 times Westland's latest earnings.

Both the bid and the terms of a side deal, whereby GKN will give the former Westland shareholders any profit from the settlement of a dispute with the Arab Organisation for Industrialisation, are no more than sighting shots.

The big question is whether a firm of Westland's size has a long-term future in the world defence market.

Mr Jones understandably pleads it has, claiming that a parent company might have conflicting priorities.

That argument is likely to be severely tested in the two months the bid is likely to last.

(Photographs omitted)

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