LONDON, March 6 (Reuters) - Melrose Industries should seek clearance from Britain's pensions regulator in its bid for UK engineering company GKN, as its support for GKN's pension scheme would likely be weaker than existing arrangements, lawmakers said on Tuesday.
The fate of deficit-ridden pension schemes after company takeovers is a concern in Britain following the collapse of department store chain BHS in 2016.
Melrose, whose business model is to buy engineering companies, improve their margins and resell them, has made a 7 billion pound ($9.7 billion) hostile bid for GKN, and has said it will add 150 million pounds to the GKN pension scheme.
"Melrose claims an impeccable record in protecting pension rights. The surest way to demonstrate its commitment in this case would be to apply voluntarily for clearance," Frank Field, chair of the parliamentary work and pensions committee, said in a statement.
The pensions regulator currently only has powers to force an acquiring company to strengthen support for a takeover target's pensions scheme if the bidder asks for clearance.
"We have been concerned that the increased leverage involved in the proposed takeover by Melrose is likely to have a detrimental impact on covenant," Lesley Titcomb, chief executive of the regulator, said in a letter published by the committee, adding the regulator had "strongly encouraged Melrose to make a clearance application."
($1 = 0.7217 pounds) (Reporting by Carolyn Cohn Editing by Mark Potter)