Activist hedge fund Elliott, which rose to fame last year after a drawn-out battle with Dulux maker AkzoNobel, has revealed it owns a stake in engineering giant GKN which is battling a £7bn takeover bid.
The US firm now owns a 1.7 per cent interest in GKN, which manufactures parts for Boeing and Volkswagen.
Stock exchange filings also show that Elliott holds a 0.5 per cent short position in Melrose Industries, the turnaround specialist which made the approach and was rebuffed by GKN. This means Elliott would stand to benefit if Melrose's shares sank, although they have generally been on the rise since news of its bid emerged.
Although sources have told City A.M. that other bidders – including buyout house Carlyle – are circling GKN, Melrose today met with GKN shareholders to attempt to persuade them of the value of its offer.
The firm plans to allow shareholders to retain a 57 per cent stake as it improves the business, and a Melrose spokesperson told City A.M. that any outright cash offer would have to be substantially in excess of £7bn in order to cover the loss of this potential upside.
Yet in refusing the Melrose approach, GKN revealed its own turnaround plans which could yet persuade shareholders not to sell up. It said it would accelerate plans to separate its automotive operations from its aerospace business in a bid to stave off the takeover attempts – a move welcomed by existing investors, who had renewed calls for a split since an unexpected profit warning in October.
The situation which Elliott has waded into bears a striking resemblance to the AkzoNobel battle. In that case too, Elliott took a stake in the company which was being wooed by US rival PPG.
While Elliott was pushing for the takeover by PPG, Akzo refused to give in and instead revealed its own improvement plan. Dealings became heated, as Elliott accused Akzo of refusing to listen to shareholders, and both parties ended up going to court.