UPDATED [16:15 BST] – Melrose wins control of GKN
The investment company Melrose has won control of GKN after a ballot of GKN shareholders. It had the support of 52.43% (voting rights) of shareholders.
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Christopher Miller, Chairman of Melrose, said today in a statement: “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 £10 billion and a tremendous future.
“We are looking forward to working with GKN’s talented workforce and to delivering for customers and all stakeholders. Melrose has made commitments as to investment in R&D, skills and people and we are very excited about putting these into action.
“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.”
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By GlobalDataCOMMENT: The first priority for the new owner after the turbulence of recent months is to steady the business, restore stability and reassure employees and customers. The commitments given by Melrose a few days ago go some way to doing that. Ultimately though, some years out, a restructuring looks inevitable and that’s what the existing board wanted to do (as evidenced by the planned tie-up of Dana with GKN Driveline – a pretty good synergistic combination with excellent scaling up potential). The real problems are in the aerospace division (in North America) and GKN shareholders appear to have concluded that a more aggressive business approach – from a company such as Melrose – is required to put the company on a path to higher growth and deliver greater shareholder value. Indeed, if the vote had gone the other way, the GKN share price may well have dived. The GKN board had a very tough job to do, given recent problems, in beating off a high bid from a voracious investor company (tagline: Buy, Improve, Sell) with a track record of pleasing investors. That they see such value in GKN is one positive for their opponents inside GKN and indeed the shareholders who backed the board – who will be understandably disappointed and concerned about the future today – to hang on to.
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Investor company Melrose’s hostile bid to take control of UK-based engineering firm and major automotive Tier 1 supplier GKN is coming to a head this week. GKN shareholders have until lunchtime today (Thursday, March 29, 13:00 BST) to decide (cast their ballots) on the relative merits of Melrose’s proposal versus that of GKN’s management – which wants to tie-up GKN Driveline with US-based supplier Dana.
Earlier this week, UK Business Secretary, Greg Clark, wrote to Melrose asking the company to give firm undertakings about GKN’s future. In response, Melrose said it would keep GKN’s British base and maintain levels of R&D spend. It also said that for a five-year period, it would not break the company up and the business would continue trading on the London stockmarket.
“Melrose fully stands behind its plan to work for the improvement of not only GKN, but the UK economy as well,” Melrose said in a statement.
GKN’s board has insisted that its plan is best for the company and shareholders. It said in a statement: “GKN believes that the need for the Secretary of State to intervene and send his letter is further evidence that Melrose is the wrong owner for this business and that shareholders would be taking a risk in accepting this offer.”
GKN Chief Executive, Anne Stevens, has highlighted the complementary business activities of GKN Driveline and Dana.
“The complementary nature of the two businesses and our shared commitment to R&D and long term investment creates a fantastic opportunity to build a world leading company and create meaningful shareholder value by delivering $235 million in synergies,” she said.
“The fact that Melrose appears to have been forced into these undertakings shows once again that it would be an unsuitable owner of GKN,” she said. “Melrose is asking shareholders to consider a set of last-minute undertakings which leave considerable uncertainty and do not adequately address the need for long-term shareholder value creation.
“If this is how Melrose behaves when it is bidding for GKN, how can it be trusted if it gets its hands on the wheel? The Melrose offer remains the low value, high risk option for shareholders.”
See also: Dana and GKN Driveline sign agreement for merger
