A Labour and a Conservative MP have written to Britain’s most senior tax collector complaining that a substantial proportion of shares in GKN, the target of a hostile takeover bid, are being controlled by short-term investors in such a way that they will not have to pay tax if their shares are acquired by Melrose.

Labour MP Jack Dromey, who represents Birmingham Erdington, and Conservative MP Jeremy Lefroy, who represents Stafford, told the chief executive of HM Revenue & Customs, Jon Thompson, they were unhappy that a chunk of the engineering group was controlled by arbitrageurs holding shares via derivatives, meaning they were not liable for stamp duty on disposal.

Quick guide GKN through the years Show Hide 1759-1840s GKN began as the Dowlais Ironworks Co in south Wales in 1759. By the mid-19th century it had become the largest ironworks in the world, producing almost 90,000 tonnes of iron a year. 1900 A reverse takeover pushed through by entrepreneur Arthur Keen created Guest, Keen & Co. Two years later, Keen drove through the takeover of a reluctant Nettlefolds Ltd and the enlarged company became Guest, Keen & Nettlefolds. It was the largest iron, steel and coal group in the country. 1914-45 During the first half of the 20th century GKN became heavily involved in wartime production, while also making its first move into the emerging motor industry. It produced Spitfires, a specialised tank for the D-day landings and millions of steel helmets. GKN emerged from the second world war as Britain’s biggest steel producer but was virtually bankrupt. 1960s-70s Faced with the Labour government’s drive to nationalise the steel industry, GKN gradually withdrew from steel over the next 20 years. It pushed into the automotive industry. 1980s The group made the first loss in its history; it soon expanded globally. In 1988 it acquired a stake in Westland, the British helicopter and aerospace manufacturer, and moved into aerospace technology. 2001 GKN focused on four businesses: aerospace, Driveline, powder metallurgy and land systems. It was relegated from the FTSE 100 index. 2017 GKN issued a series of profit warnings after writedowns at its North American aerospace division and its chief executive designate Kevin Cummings was ousted. 12 January 2018 Melrose made a hostile £7bn cash-and-shares takeover bid, upped to £8bn in March. Non-executive director Anne Stevens, a former Ford executive, became GKN’s new CEO. March 2018 GKN struck a $6.1bn (£4.4bn) deal on 9 March to merge its automotive business with the US firm Dana in an attempt to fend off the Melrose bid. Shareholders have to decide whether to accept or reject the bid by 1pm on 29 March. Melrose needs 50% plus one share support. Photograph: David Davies/PA

“What is of particular concern, however, is that the fate of GKN could well be decided by a group of predatory short-term investors who have no interests in the sustainability of the business beyond the next few weeks. There are now reports that these same short-term funds will make this decision without paying stamp duty on their shares,” the two wrote.

The letter represents a last-minute political intervention as the deadline for Melrose’s £7.8bn hostile bid looms. The closely fought takeover battle concludes at 1pm on Thursday, with the situation finely balanced.

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GKN and its political supporters have argued that turnaround specialist Melrose has a short-term approach and will restructure GKN and sell it on in parts over the next three to five years; Melrose counters by saying it has a proven record in building shareholder value.

Melrose pledges to keep its HQ in UK after hostile GKN bid Read more

Ministers have faced demands from both backbench Labour and Conservative MPs to intervene and refer the bid to the Competition and Markets Authority. However, on Tuesday the business secretary, Greg Clark, said he had won a commitment from Melrose to agree to remain headquartered in the UK and to retain ownership of GKN’s aerospace division until April 2023, although critics said these pledges were not formally binding.

GKN is one of Britain’s oldest industrial companies, tracing its roots back to 1759, and predecessor firms made cannonballs for the Battle of Waterloo and supplied tracks for Brunel’s Great Western Railway. It employs 60,000 staff around the world and 6,000 in the UK.

The two MPs also demanded that tax officials mount an “urgent investigation into shareholder dealings in this transaction” and called on HMRC to “vigorously pursue all stamp duty owed”. They also asked Thompson to respond with urgency given that the bid deadline was so close.