Tuesday 12 November 2019

Melrose succeeds in £8.1bn hostile takeover of GKN

A total of 52.43% investor votes were cast in favour of the deal going ahead.

Melrose has emerged victorious in its takeover efforts (David Davies/PA)
Melrose has emerged victorious in its takeover efforts (David Davies/PA)

By Ravender Sembhy, Press Association City Editor

Melrose has succeeded in its hostile bid to take over GKN for £8.1 billion after securing the backing of the engineering giant’s shareholders.

A total of 52.43% investor votes were cast in favour of the deal going ahead, just above the 50% plus 1 share threshold.

Melrose chairman Christopher Miller said 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.”

GKN accepted defeat shortly after and Melrose’s victory brings to a close a bitter battle that has raged since January, although there were immediate calls for Business Secretary Greg Clark to intervene in the deal.

Unite assistant general secretary Steve Turner called on Mr Clark to use powers under the Enterprise Act to call the deal in on national defence grounds.

Mr Clark said in a statement: “Now that shareholders have made their decision the Government has a statutory responsibility to consider whether the merger in its proposed final form gives rise to public interest concerns in the areas of media plurality, financial stability and national security.

“This assessment will be made by the appropriate authorities and the conclusion set out in due course”.

The UK’s aerospace and defence trade association ADS also said the Government must assess whether the bid should be referred to the Competition and Markets Authority.

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Liberal Democrat leader Vince Cable said that Melrose’s victory was only secured “through votes from short term speculators”, a reference to the large number of hedge funds that make up GKN’s share register.

Melrose has stressed its takeover will improve “not only GKN, but the UK economy”, committing to keeping the firm listed in London and headquartered in the UK as part of a five-year pledge.

Mr Miller added: “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.”

Shares in GKN ended the day 9% up on the London Stock Exchange.

Melrose’s takeover will spark fears for jobs after Airbus, GKN’s largest customer, earlier warned it could not give any new business to the firm if the deal with the turnaround specialist went ahead.

Unions and MPs have also warned over asset stripping and flagged national security concerns.

GKN has a history that dates back to the 1900s and was instrumental in wartime manufacturing.

During the First World War, it was heavily involved in making steel for military purposes, such as shells.

After the outbreak of the Second World War, GKN produced Spitfires and specialised tanks for the D-Day landings, as well as millions of steel helmets.

GKN ultimately attempted in vain to fight off Melrose’s advances, despite chief executive Anne Stevens describing the takeover as “high-risk” and the offer not coming close to reflecting true value.

Its counter measures, which included a deal to sell its automotive division Driveline to US firm Dana, fell on deaf shareholder ears.

GKN became a target following profit warnings in October and November after problems at its US aerospace division sent shares tumbling.

GKN is headquartered in Redditch and has its biggest factory in Filton near Bristol, where it employs 1,454 workers.

Other plants in the UK include Cowes, Birmingham, Luton, Telford, Kings Norton, Portsmouth, Uxbridge, Leek and Oxford.

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