Hostile takeover move for GKN gets double boost
A controversial takeover of GKN moved a step nearer to reality today.
Melrose Industries has been handed a double boost in its pursuit of the engineering giant, which employs around 340 people at Hadley Park, Telford, making structural parts including wheels.
The bid, which is opposed by GKN, has won regulatory backing in both the US and Canada.
The £7.4 billion hostile bid has been cleared by the US Federal Trade Commission under its competition rules after being handed “early termination of the applicable waiting period”.
Canadian authorities have also waved the proposed deal through after its Competition Bureau sent a “no-action letter” to Melrose.
The move comes after GKN wrote to investors earlier this month to warn over the “entirely opportunistic” takeover bid, saying its inexperienced management team and short-term business model are “inappropriate” for the business.
The letter, signed by GKN chairman Mike Turner, said. “The Melrose offer is not a good deal – it is low price and high risk.
“On the basis of its most recent share price, Melrose claims its premium is 22 per cent. By comparison, precedent FTSE 100 takeovers have an average premium of 43 per cent.”
He also pointed to Melrose’s “weaker” credit profile and “materially higher proposed leverage” as a point of risk for shareholders, while claiming that the turnaround specialist’s management team “lacks relevant experience” and that “its short-term business model is inappropriate for GKN”.
The group also outlined a new strategic plan, which will see GKN sell off parts of its business to fund a £2.5 billion payout to investors.
Employing 58,000 people across 30 countries in aerospace and automotive engineering, 258-year-old GKN stunned the market in October when it cut its profit outlook due to problems in the aerospace division.
GKN, which also makes wing tips for Airbus, ditched its incoming boss in November less than two months before he was due to take the top job as it warned over another hit in its troubled US plant.
The Redditch-based firm has responded to the unwanted attention by vowing to separate its aerospace and automotive units and hiring a new chief executive.
Melrose swooped after GKN ‘s shares tumbled following the profit warning. Alcester-based Melrose specialises in adding value to companies before selling them on at a profit.
Shares in GKN and Melrose rose one per cent and fell by 0.1 per cent respectively in morning trading on the London Stock Exchange.