This is, in my view, a debatable issue; your broker should be able to give you a definitive answer. My view is that if you willingly sold your GKN shares to Melrose, then on the day you receive your Melrose shares plus cash:
(1) Multiply the Melrose shares you were allotted by the offer price and add the cash you received (A).
(2) Calculate the cost of the GKN shares you bought (and have now lost) including commission and stamp duty (B)
Capital gain = A - B.
In time you will realise that you could have made a greater capital gain by just selling the GKN shares on the open market. Mind you, the way you have done it will have minimised your capital gains liability because just before April 5 2019 you can sell your Melrose shares and offset the capital loss against the capital gain calculated above.
"Of course, the hedge funds have worked all this out and are working out their strategy as to how to make their millions. I don't expect much action until Melrose's post merger Balance Sheet is published. Within a week of this you can expect Melrose's share price to drop 20%."
Well numberbiter this strategy at the moment involves not shorting Melrose. The shorts have reduced. One argument not thought through.
As to the share price dropping we can all revisit that with you at the time. No doubt you will absent from here when it does not come to pass.
I'm not sure I understand your comment that shareholders following Lord Hanson lost everything. Hanson demerged in 1996 into four separate companies: Imperial Group, Eastern Group, SCM and Hanson - the rump business of ARC, Hanson Brick and the residual holding in National Grid.
Any shareholder who held all four on demerger did pretty well in years to come as the last three were taken over and despite the recent price fall Imperial has been a pretty sound investment over the years in terms of total return. I've still got mine.
Sorry if I have upset you Pike; all I have done is report the facts. You should be able to work it out for yourself:
(1) Before the bid, Melrose was heavily indebted.
(2) When they pay GKN shareholders 81p per share, their debt will soar.
(3) Then they have agreed to resolve GKN's pension deficit. More debt.
(4) Finally, thanks to the Transfer of Undertakings Act, it will cost them to get rid of GKN's employees.
I am very much looking forward to reading Melrose's consolidated Balance Sheet when the merger is fully complete. Of course, the hedge funds have worked all this out and are working out their strategy as to how to make their millions. I don't expect much action until Melrose's post merger Balance Sheet is published. Within a week of this you can expect Melrose's share price to drop 20%.
I admire your unremitting faith in Melrose. Unfortunately even Melrose's directors cannot fight against financial reality. Like Lord Hanson, they will do very well for themselves. But remember, those shareholders following Lord Hanson eventually lost everything. History does repeat itself; you have been warned!
Maybe GKN was a great company but it no longer is. As is apparent from the shenanigans of its past management it is clear their only competence was fiddling the takeover to their advantage while increasing GK's debt to the detriment of current employees (as per Sharks post below). It requires MRO to sort out this shambles as the excoriating comment below indicates.
P.S. As I recall, Mike turner was in charge at BaE while that company was involved in bribe scandal. Hardly the quality of Chairman that GKN needs.
What we have witnessed is probably the worst example of stock manipulation in the last decade. A highly indebted company with a very weak Balance Sheet bids for an iconic profitable company that was not doing as well as it should, but with a sound Balance Sheet. Any investor in their right mind would have rejected the bid, but it succeeded by a small majority only because hedge funds were buying up GKN's shares to support it.
The hedge funds knew that once the deal was complete Melrose would be intolerably indebted to an extremely high level, so there was a fair chance of this company going bust, especially as they knew key customers such as Airbus could not trust a company whose ethos was a quick buck, rather than committing a proportion of revenue to research. So now the shorting begins; they will make several million pounds out of this.
Those GKN shareholders who sold out have done very well for themselves, but those who accepted Melrose's offer will likely lose a substantial proportion of their investment. As a country we have lost a great company; employees, especially those in GKN's pension scheme will also lose out. The country will suffer economically just to allow fat cat hedge funds to cream it in.
The problem is we have a weak government focused solely on Brexit, so they happily allow potential disasters such as this without even a moments thought.
Melrose has said that when it has 75% agreement then it will delist GKN which make the shares difficult to trade. I believe it has until 19th April to do this and GKN has recommended this course of action.
When Melrose has 90% it can compulsolary purchase the remaining 10%.
What exactly is the base offer at the moment? Is it the revised offer on the 12th march 2018. ie 1.69 Mro shares for each gkn and 81p? When the offer become unconditional does that mean all existing gkn shareholder would automatically deemed to have accepted the revised offer?
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