Tuesday 23 October 2018

GKN accuses hostile bidder Melrose of ‘fake’ claims as war of words heats up

The embattled engineer, which rejected the offer on Wednesday, said Melrose had made “misleading statements” over the value premium of the bid.

Takeover target GKN has accused hostile bidder Melrose of making
Takeover target GKN has accused hostile bidder Melrose of making "fake" claims in its £7.4 billion offer (David Davies/PA)

By Holly Williams, Press Association Deputy City Editor

Takeover target GKN has fired a broadside at hostile suitor Melrose, accusing it of making “fake” claims over its £7.4 billion bid and biting off more than it can chew.

The embattled engineer, which rejected the offer on Wednesday, said Melrose had made “misleading statements” over the value premium of the bid.

GKN said the claim that the 430.1p a share price offered represented a 32% increase on the price of GKN’s stock on the last business day before the approach was a “fake premium”.

In the blistering rebuttal, GKN also warned that it is “significantly” larger than any of the businesses previously bought by Melrose.

It said: “GKN’s board considers 32% to be a fake premium.

“Melrose’s market capitalisation on 5 January was significantly smaller than GKN’s on the same day, Melrose is proposing to fund 80% of the offer consideration in shares and Melrose brings no industrial synergies.”

GKN said it believed the “true premium” is less than 11%.

It added: “GKN is more than five times larger than any of Melrose’s prior acquisitions by revenue. Melrose has very limited experience at board level of managing Tier 1 aerospace and automotive suppliers.”

Melrose has swooped on GKN after profit warnings in October and November following problems at its US aerospace division sent shares tumbling.

GKN – which makes wing tips for Airbus and parts for car giants including Mercedes and Jaguar Land Rover – also 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.

GKN has responded to the unwanted attention by vowing to separate its aerospace and automotive units and hiring a new chief executive.

In its latest defence against Melrose, it took issue with claims that it wants a “hasty break-up” of its businesses.

It said: “This is not the case. As clearly stated in GKN’s announcement released on 12 January, the timing of the separation will be determined by the need to maximise the economic benefits and minimise the costs associated with separation.”

On pensions, GKN also said it was “not accurate” that it had increased the deficit by shutting the main scheme to future accruals.

And it highlighted its “close working relationship” with the trustees of the company schemes, which warned earlier this week that any potential buyer would have to first come up with a plan to tackle a funding gap of more than £1 billion.

GKN ended by saying it “wholeheartedly agrees with Melrose that GKN is comprised of world-leading businesses that offer upside potential”.

“GKN looks forward to publishing further detailed information in the near future on its plans to deliver this upside potential to existing shareholders through the improvement of GKN’s cash generation and profit margin as part of Project Boost,” it said.

The war of words showed no sign of abating when on Thursday afternoon Melrose issued its own rebuttal, claiming that the “real premium” for GKN shareholders is reflected in the current share prices of both firms, which have risen since the takeover announcement.

Melrose boss Simon Peckham added: “In less than a week shareholders have seen 104p per share or £1.8 billion added to the value of GKN which shareholders can, if they wish, realise today in the market.

“Melrose’s actions have done that, not GKN’s management.

“Melrose believes that the shareholders of GKN are best placed to judge which management team is better equipped to deliver the greatest value to shareholders of GKN.”

Press Association

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