Engineering giant GKN is considering giving its shareholders more time to mull Melrose's £7.4bn hostile bid, as it waits to see whether US agencies will block the takeover on national security concerns.
GKN today stated that it was not sure whether the Committee on Foreign Investment in the US (Cfius), which can block deals involving a US business if they raise national security concerns, would have made its decision about the Melrose bid by the end of the usual City Code offer timeline.
It said it might agree to extend the offer timetable to wait for this judgement, so that shareholders could "make a fully informed decision" about whether to accept the deal.
Only the UK government's Takeover Panel can grant a deadline extension, with GKN's permission, and Melrose must first decide to apply for it.
The Takeover Panel considers the circumstances at the time when deciding whether to grant an extension, such as whose fault the delay was, but in circumstances such as this – where the delay is due to an external body like Cfius – City A.M. understands the panel would be likely to approve an extension.
Though GKN is not a US business, it is involved in a number of highly sensitive US projects, such as the manufacture of components for its military B-21 bomber aircraft.
GKN is still fully against Melrose's hostile bid, as chief executive Anne Stephens has repeatedly called the offer "derisory". The company today said its management had "a far better strategy and detailed operating plan, informed by real industry expertise, to deliver shareholder value".
Taking a gamble
Melrose published its formal offer document on 1 February. From that date, it has 60 days to receive approval from more than 50 per cent of GKN's shareholders.
If Melrose does reach this threshold by day 60, it then has another 21 days to gain Cfius approval, since it said that its offer was conditional on this thumbs-up.
But GKN does not think this total of 81 days will be long enough for the US agency to make a decision. So Melrose must take a gamble as to whether it extends the 60-day deadline, at the risk that some shareholders may decide to withdraw support for the deal, or hope that Cfius gives an answer within the 81 days.
If it did not, Melrose would either have to waive the need for approval from Cfius or allow the offer to lapse.