Melrose has won the battle for engineering giant GKN as shareholders vote in favour of takeover
The long-running takeover battle for GKN has finally drawn to a close, with Melrose Industries snatching the engineering giant from the grip of its board.
The “most bitter takeover battle in recent memory”, according to Interactive Investor’s Lee Wild, will now end with London-listed Melrose merging GKN’s aerospace and driveline divisions into its existing structure for £8bn.
Had shareholders’ votes swung the other way, GKN would soon be merging its driveline division with US manufacturer Dana in a pre-agreed $6.2bn deal.
In a statement, Melrose said as of 1pm, more than 52 per cent of shareholders had voted in favour of accepting Melrose’s bid.
Christopher Miller, the chair of Melrose, said: “We are delighted and grateful to have received support from GKN shareholders for our plan to create a UK industrial powerhouse with a market capitalisation of over £10bn and a tremendous future.
Let me assure you that GKN is entering into very good hands.
We would like to thank our shareholders for their continued support of the Melrose strategy thus far. We are full of enthusiasm as we begin this next stage of the Melrose story and look forward to creating substantial value for our shareholders, old and new.
Jack Dromey, an MP who led political opposition against Melrose, said it was a “bleak day for British industry”.
The British national interest sold down the river by hedge funds to help Melrose to a narrow 52/48 victory. A bleak day for British industry pic.twitter.com/GBgaOP1UHW— Jack Dromey MP (@JackDromeyMP) March 29, 2018
The analyst view
Most analysts had favoured Melrose’s chances, despite the turnaround firm riling politicians and workers’ unions.
“We are not fans of the Dana deal and believe that an improved Driveline – whether it be by [GKN management’s] Project Boost or Melrose – would fetch substantially more than the current $6.2bn offer,” said Peel Hunt analyst Harry Philips.
Meanwhile David Larkham at Numis called the Dana bid the “right deal, wrong price, wrong time”.
Now Melrose has won control of the company, it must hope that the Committee on Foreign Investment in the US (Cfius) – which can intervene in takeovers on the grounds of national security – will approve the sale.
If Cfius declines to do so, then Melrose will likely have to sell the aerospace division – which manufactures components for military aircraft such as Chinooks – to an approved buyer.
Melrose must also now keep its promises, after it made legally binding commitments to business secretary Greg Clark yesterday to maintain research spending and keep the business based in the UK.
Though Melrose had also “offered a legally binding commitment to the Secretary of State” to hold on to the business until 2023, this did not appear in the list of formal post-offer undertakings – it remains to be seen how binding that commitment is.
Shareholders had seemed divided by the propositions posed by GKN and Melrose. Aviva and Elliott had backed Melrose’s offer, while Jupiter, Sanderson Asset Management, Pelham Capital and Columbia Threadneedle had all opposed it.