A series of unfortunate events gave Melrose its opening. In November, GKN admitted that up to £130m of overvalued and obsolete aircraft parts had been discovered gathering dust in its US factories. The write-off triggered the second profit warning in months and a share price crash, followed by the sacking of chief executive designate Kevin Cummings.
The Midlands-based company, which makes components for Airbus A380 superjumbos and Mercedes-Benz cars, appointed non-executive director Anne Stevens as interim boss.
Melrose plunged into the turmoil, offering GKN shareholders £1.4bn in cash and about 57% of the merged company. GKN responded with a plan to break the business in two and made Stevens, 69, its permanent chief executive.
Peckham is enjoying the hunt. He and his team have been touring the City, speaking to GKN investors. His mobile phone rings repeatedly while we talk, though he doesn’t answer it.
It would be “stupid” for GKN to try to fend off Melrose’s approach by selling a division, he says. “British Leyland had a great heritage at one stage,” he adds, pausing for effect. “We have regard for heritage, but just because something is 250 years old does not mean it’s got a right to survive for the next 250 years. You don’t preserve a business in aspic and say it’s going to last for ever.”
GKN had been on Melrose’s radar since Peckham, executive chairman Christopher “Jock” Miller and Roper formed the buyout firm in 2003. The fourth member of the controlling quartet is finance director Geoffrey Martin.
A lawyer by training, Peckham had worked with Roper and Miller, a former Hanson executive, in the 1980s and 1990s at the glue-to-bottle-tops conglomerate Wassall. When Miller and Roper decided to launch Melrose, he leapt at the chance to join them. He reels off some of Melrose’s deals: engineering conglomerate FKI, which almost tripled the value of shareholders’ investment; Elster, a German metering business bought in 2012 and sold to the American industrial giant Honeywell three years later, with a 2.3 times return for investors.
“Private equity do 10 deals and know they get a couple wrong,” he says. “We’ve never done one wrong. We’ve produced a good return every single time.”
The firm’s pursuit of GKN is like a “job interview with the shareholders”, he posits. “We’ve been to see them to say, ‘What we’re asking you to do is swap your management team. We think we could do a better job than the existing ones.’ ”
Stevens, a former Ford executive, is “not the right person to change the culture of GKN” and enable the business to “escape its underperformance”, he adds.
Melrose’s offer has sparked fears among unions that deep cost cuts will lead to job losses and engineering skills disappearing from the UK. That fear was intensified by Melrose’s decision, announced on Thursday, to axe 270 jobs in the Leicestershire factory of its misfiring Brush generators operation.
Labour wants the deal blocked and Liberal Democrat leader Sir Vince Cable has called for the government to intervene to prevent “asset-stripping” by Melrose. “It’s just not true, is it?” retorts Peckham, his accent bearing faint traces of his Geordie roots. “Do you think if we had asset-stripped a business like Elster, Honeywell would have bought it?”
There is also concern over GKN’s £1.1bn pension deficit, and Melrose’s plan to raise the manufacturer’s leverage from 0.6 times earnings to 2.5 times. Peckham insists that debt level is “prudent”, and says Melrose would pump £150m into the pension on acquisition.
Peckham labels the parts maker’s efforts to fight off the bid as “a sort of Project Fear”, saying: “All the noise from GKN is to distract people from the fundamental point that this is a management story. Why are they in the newspapers with silly stories about pensions?
“It was wrong for GKN to attempt to use a pension scheme and cause concern in that way as a defence tactic. We’ve not created this deficit, they have. We’ve dealt with all our pension deficits.”
Melrose has some way to go before it can claim victory. Private equity firms and rival industry players are circling, and the takeover would need the approval of government bodies including the US committee on foreign investment.
Success would make a fortune for Peckham and Co. They already command some of the biggest bonus packages in the City, another reason for the unwanted private equity label. Last year the quartet shared a £160m bonus pot.
“Yes, we are well paid, yes, we do well, but only if everyone else does well. Look at the money a GKN shareholder has made in the past three weeks. We bang on the door and about £2bn of value has been added to GKN’s share price.”
Simon Brazier, a fund manager at Investec, has invested in Melrose for a decade. They are “hard-nosed commercially experienced managers” who “work hard and play hard”. Richard Buxton at Old Mutual has backed them since the Wassall days. “The beauty is that they bring private equity type discipline and rewards to the quoted market.”
Money is a tricky subject for Peckham — hence his emphasis that golf does not distract him. (Miller and Roper, however, are passionate golfers.) “I cannot tell you that I never go out for lunch,” he says, a smile breaking across his fleshy face.
“I do like the odd alcoholic drink, but the bottom line is I’m a workaholic. If you went to my wife and said, ‘He doesn’t work hard enough,’ she would laugh.”
Peckham comes from industrious stock. His father climbed from apprentice Fleet Street printer to human resources director of a Tyneside printing firm. “No matter how well you think I’ve done, he’s done even better,” Peckham says. His mother was a nurse, then a probation officer. His brother is an NHS psychologist in Newcastle upon Tyne.
Sheepishly, Peckham admits that he is a member of Mayfair’s exclusive Arts Club and has a “small place” in Kensington, a stone’s throw from the royal palace. There’s also a ski chalet in Canada.
At this point a tanned head appears around the door: “Did I hear what you just said? I thought this was about business? It’s not about skiing,” barks Roper, before vanishing.
It is a reminder of the unusual power-sharing set-up at Melrose. Peckham calls it a partnership, split across about 10 executives. Only 33 staff work for the holding company, although its businesses employ thousands more.
There is a fine balance between Miller, Roper, Martin and Peckham. “I’ve just had a big barney with Chris about GKN,” confides Peckham. “[But] I’ve enormous respect for them and we are never going to fall out over work. We do this, all four of us, because we enjoy it. I go home in the evening with a smile on my face.”
The life of Simon Peckham
Richard Burton in wartime thriller Where Eagles Dare
ALAMY
VITAL STATISTICS
Date of birth: August 13, 1962
Status: married with two daughters
School: Dame Allan’s, Newcastle upon Tyne
University: Newcastle; read law
First job: trainee solicitor
Pay: £461,000 salary and share of £160m bonus pot
Car: Audi A5
Home: Oxshott, Surrey
Favourite film: Where Eagles Dare
Book: Where Eagles Dare, by Alistair Maclean
Music: Lindisfarne
Gadget: Samsung Galaxy S8 phone
Last holiday: Whistler, Canada
Charity: South London Cares, which encourages young people to help older neighbours
Date of birth: August 13, 1962
Status: married with two daughters
School: Dame Allan’s, Newcastle upon Tyne
University: Newcastle; read law
First job: trainee solicitor
Pay: £461,000 salary and share of £160m bonus pot
Car: Audi A5
Home: Oxshott, Surrey
Favourite film: Where Eagles Dare
Book: Where Eagles Dare, by Alistair Maclean
Music: Lindisfarne
Gadget: Samsung Galaxy S8 phone
Last holiday: Whistler, Canada
Charity: South London Cares, which encourages young people to help older neighbours
WORKING DAY
There is no typical working day for the chief executive of Melrose. He starts the day by checking emails, listening to news on the radio and having a shot of caffeine. When at the London office, he juggles calls and face-to-face meetings with businesses, customers, investors and advisers. As much of the business is in America, he is often on the phone till late.
There is no typical working day for the chief executive of Melrose. He starts the day by checking emails, listening to news on the radio and having a shot of caffeine. When at the London office, he juggles calls and face-to-face meetings with businesses, customers, investors and advisers. As much of the business is in America, he is often on the phone till late.
DOWNTIME
Simon Peckham loves to ski and goes to the gym to keep in shape. He also enjoys watching rugby. “I’m a big socialiser,” he admits. “I’m happiest with family and friends in a pub having a few pints of beer. I am by nature a social animal.”
Simon Peckham loves to ski and goes to the gym to keep in shape. He also enjoys watching rugby. “I’m a big socialiser,” he admits. “I’m happiest with family and friends in a pub having a few pints of beer. I am by nature a social animal.”
