In the penultimate race of the Cheltenham Festival yesterday, Melrose Boy was running in the handicap hurdle. Amid the excitement, punters had good reason to keep a close eye, too, on the horses near-namesake.
Melrose, the London-listed turnaround specialist, is entering the final stretch of a three-month endurance race to clinch the acquisition of GKN in the first hostile takeover battle of a FTSE 100 company in a decade.
The hurdles facing the bid for the automotive and aerospace parts maker have been coming thick and fast this week before a deadline of March 29 for shareholders to accept the offer.
First Melrose sweetened its offer on Monday with a final cash-and-shares bid and Aviva, a top 25 shareholder in GKN, went public with its support.
Then what seemed like a breakneck race to the finish line ran into some heavy going. Airbus, GKNs largest aerospace customer, warned on Wednesday that it would be practically impossible for us to give any new work to GKN under such an ownership model, when we dont know who will be the long-term investor. That, in turn, was seized upon by the target companys chairman and a group of cross-party MPs that were vocal in defence of the beleaguered engineer.
Politicians are urging Greg Clark, the business secretary, to scrutinise the deal amid concern that Melroses strategy of buying, improving and selling on businesses over a three-to-five-year cycle could endanger jobs and Britains industrial landscape.
GKN, which traces its roots back 259 years, has global sales of more than £10 billion and employs about 6,000 people in Britain, with sites in the Midlands and on the Isle of Wight.
Adrian Bailey, the former chairman of the Commons business committee who opposed the deal in a Westminster Hall debate on Thursday, claimed that Airbuss intervention had put the skids under the bid and that if Airbus is nervous, then other customers are going to be nervous, as well.
Perhaps, or perhaps not. So far GKNs other big aerospace customers, including Boeing, Lockheed Martin and Honeywell, have not followed suit and Rolls-Royce told The Times that it saw no reason to believe our relationship would change in the event of a change of ownership.
GKNs pension trustees, its board and unions have united against the takeover, but shareholders hold the key to whether Melrose wins the day. Some of the biggest are yet to show their hands. They include Aberdeen Standard Investments, Legal & General and Columbia Threadneedle Investments, which hold shares in both companies, according to filings.
Specialist firms seeking to persuade investors to back their horses have been appointed by both sides. Boudicca a shareholder advisory firm founded by Sheryl Cuisia, a Canadian former dance student who worked with Elliott Advisors, the New York-based hedge fund, in its campaign against Alliance Trust and Akzo Nobel is working for GKN. Georgeson is supporting Melrose.
GKN received another boost yesterday when Jupiter Asset Management, a top 30 GKN shareholder, became the first to come out publicly against the takeover. Steve Davies, a Jupiter fund manager, said that GKNs new management team was already delivering rapid progress and that GKNs proposed merger of its Driveline automotive business with Dana, an American rival, offers by far the best way forward.
Given the uncertainty, the share prices of GKN and Melrose are being watched closely to gauge investor sentiment. So-called arbitrage traders seek to profit from the price discrepancies between the predator and target. The bigger the gap, the more sceptical investors will be about whether the deal will be completed.
One stock market source said that GKNs shares were trading at about a 7 per cent discount to the offer price, and at a similar level all week, meaning that there remained some doubt.
I would guess they would be going long GKN and short Melrose shares. If the
This is scarcely credible. Management teams come and go all the time in business. This is clearly an attempt to get the high ground.
What's he going to say to MRO " look we know you guys have an excellent reputation for improving businesses and making them more efficient. But guess what we don't want that.
We are just going to shift all of our orders to a new supplier to spite you and hang the inconvenience."
OH please, business does just not work that way. Market clearly spooked not. Share price of MRO up on the threat. Keep trying Lupo.
"Mr Williams, who is chief operating officer at the planemaker's commercial aircraft division, said: "The nature of our industry is one that requires a commitment to long-term investment and strategic vision.
"The industry does not lend itself to shorter term financial investment which naturally reduces R&D budgets and limits vital innovation.
"It would be practically impossible for us to give any new work to GKN under such ownership model when we don't know who will be the long term investor.""
"Everyone has the occasional mortifying experience. But few can be this bad: getting the GKN chief executives age wrong.
Mea culpa and all that. On Monday I noted that Anne Stevens was that very day celebrating her 70th birthday. She wasnt, and not only because she was so busy trying to fend off Melroses £7.8 billion bid. The birthday greetings for the still 69-year-old Ms Stevens were premature, as her PR man pointed out, demanding a correction.
Annes birthday is in December. Please correct this elementary mistake, he wrote, before claiming that the sole reason for mentioning her age was to make out she was too old to run GKN and signing off with: Labelling Anne Stevens a septuagenarian without having checked your facts is consistent with that mentality.
Anyway, the correction duly appeared, plus an apology for the error just the sort of humbling experience that makes you wonder: how the hell did that happen? So, I checked the facts again, starting at Companies House.
Look up GKN and theres the entry for Anne Stevens: Date of birth March 1948. Not exactly December. Go back to the filing for the day she joined GKN in July 2016 as a non-exec and there you find she is an American born on **/03/1948 the month of a birth date lately sufficing for Companies House. Moreover, thats consistent with GKNs 2016 annual report, issued on March 29, 2017. There you find shes 69. So, if her birthdays in December, wouldnt she now be 70?
Still, what about the actual day she was born? Well, luckily Ms Stevens is also a non-exec at miner Anglo-American, on the board since May 2012. Have a squint at its website and it has her down as 70. Not only that. It says her date of birth was 12/03/1948 the same as the Companies House filing for her Anglo appointment. In short, a birthday on Monday.
So does Ms Stevens not know when she was born? Well, a more prosaic explanation is that she made the filings for her appointments in the American format, putting the month of her birth before the day. Yet the public records have gone uncorrected for five years. And did she not spot that her age is wrong in the latest GKN annual report? Did she even read it? And what does it say about her attention to detail?
True, it would have been better to have checked things with the GKN PR man, maybe asking: Can you confirm that the public filings on Ms Stevens age are wrong?. But too late now. Still, look on the bright side. Ms Stevens has suddenly become months younger than she was officially making out. And, now, she can demand even more corrections including from the company she runs."
It's GKN who are scuppered as this "British" company, run by an American geriatric female of indeterminate age, flogs the automotive part to an American company that filed for bankruptcy several years ago. It'll be schadenfreude time when GKN hits the rocks.
Melrose are better out of this one and I'll retract my "weak sell" rating".
bit of posturing here perhaps by Airbus and Mike Turner calling on old friends for
support. With his previous incarnation at BAe I guess he's well embedded there.
Perhaps though Melrose should have seen this curved ball earlier ...?
Havent you noticed how every organisation from political parties to companies tries to get an advantage in advance of meetings/discussions. Airbus just want the high-ground when they meet Melrose today.
Why should it be "shenanigans"? MRO states quite clearly that it "buys, improves and sells". If it got hold of Aerospace, who knows where it would end up. If I were boss of Airbus, I would be extremely concerned to know what would likely happen to one of my major parts suppliers.
Really, MRO should stick to smaller less controversial buys, and I'm not saying that just because I'm a GKN shareholder. MRO have caused enough problems with this hostile bid as it is.
I imagine this signals a rather significant blow to the bid, it puzzles me and I can't help thinking there is a slight whiff of political shenanigansl to Airbus' announcement... http://www.bbc.co.uk/news/business-43414637
"Airbus has warned that it could not give any new business to UK engineering giant GKN if it were taken over by turnaround specialist Melrose.
GKN makes wing components and other key aircraft parts for Airbus, which is its biggest customer.
However, it is currently fighting off a hostile bid from Melrose, saying it fundamentally undervalues the firm.
Airbus's Tom Williams said a change like that would make it "practically impossible" to keep working with GKN.
Mr Williams, who is chief operating officer at the planemaker's commercial aircraft division, said: "The nature of our industry is one that requires a commitment to long-term investment and strategic vision.
"The industry does not lend itself to shorter term financial investment which naturally reduces R&D budgets and limits vital innovation.
"It would be practically impossible for us to give any new work to GKN under such ownership model when we don't know who will be the long term investor."
According to the Times Ann Stevens either doesn't know how old she is and Dana offloaded a load of pensioners into the PPf which was described as asset stripping at the time. It also reports that Airbus will not give any new work to GKN if taken over by Melrose.
Some direction and affirmation can be gleaned from Unilever's decision today to split the business into three. Melrose approach is very much against the 'head office knows best' dictate larger companies such as Unilever liked to preach and it seems they are taking note?
GKN fits very nicely into this framework of operating, pity the leadership think they know best and want to asset strip the life out the company.
I tend to agree. Changing the culture of GKN which is really an old fashion, top-down management type company will be difficult. Melrosess forward thinking, modern management would come as a shock and be difficult for many.
Still its out of our hands.
I would prefer one or two agreed takeovers, but ....
Am I missing something here? GKN's defence reads like the most incompetent defence to a hostile bid that I can remember. First they say that MRO's plans for the company are just financial engineering, then they propose to "create value" by splitting the auto and aviation divisions, which is just what MRO do not intend to do. Then they say that MRO is an opportunistic asset-stripper, and invoke a bunch of MPs to make noises about the national interest, then propose themselves to sell the crown jewels, i.e. the power train division, to a foreign owner, i.e. Dana Corp, at what looks to me like a shares only knock-down price. If I was a GKN shareholder, which I am not, I would be pretty exasperated with them by now. And yet it should have been reasonably easy to mount an effective defence.
As an MRO shareholder, I don't want the bid to succeed. Turning GKN round will be a long haul, I don't want to be invested in auto, and there are plenty more fish in the sea.
On the one hand Id like to get a much bigger proportion of cash returned from. Nortek, confident in the ability of Melrose to get further opportunities with other companies in the future. Im sure they have other targets, hopefully not hostile bids.
On the other hand, GKN is a good business to make improvements in. GKN shareholders will not get a good deal with Dana, but if that is their choice ok. I dont and never have held GKN.
Melrose have never paid too much, and in this case always had 10% in hand. If they walk away so be it.
" GKN deserves great credit for the way it has defended itself against a hostile takeover bid from Melrose. The engineer has put up a proper fight against a formidable adversary with a big City fan club.
However, the sudden decision to sell its automotive business to the American car parts giant Dana risks weakening its case. At the heart of GKNs defence is the portrayal of executives at Melrose as little more than aggressive asset-strippers. But the deal with Dana is just another form of asset-stripping, albeit a voluntary one.
Dana may be a good fit but the enlarged business will be headquartered in Ohio, traded on the New York stock exchange and led by James Kamsickas, Danas current chief executive.
Although it would become a UK public limited company, the Americans are no more likely to protect GKNs heritage, jobs or technology than Melrose. This battle was always going to be decided on two points: who do shareholders want to run the company; and the price on the table. A raised bid from Melrose would give it the upper hand again."
The Board of Melrose notes today's announcement by GKN in relation to the proposed sale of its Driveline business to Dana Incorporated ("Dana") and notes the following:
· The proposed new entity would be majority Dana-owned, Dana-managed and headquartered in Ohio.
· GKN shareholders would receive US-listed shares, which many would neither wish or be able to hold.
· For UK-resident shareholders of GKN, the receipt of the new Dana shares is expected to be treated and taxed as dividend income.
· The hasty sale by GKN is being proposed prior to any improvement being made for the benefit of GKN shareholders.
· This transaction will involve a lengthy and uncertain completion process, including anti-trust clearances in the EU, US and China, as well as Dana's shareholder approval, which is not expected until Q4 2018.
Christopher Miller, Chairman of Melrose said:
"Today's announcement changes nothing and is a further admission of the management failure of GKN. A hasty sale of one of Britain's most important businesses will leave it listed overseas, run by a foreign management team and rebranded as a US business. In our view it is structured in a way prejudicial to GKN shareholders' interests. We urge GKN shareholders to accept the Melrose offer."
"GKN added the enterprise value to earnings before interest, tax, depreciation and amortisation multiple for the Dana deal stood at 7.5 times. This was moderately below the 7.7 times EV to Ebitda multiple for Melrose's deal for the whole firm including its aerospace and powder metallurgy units."
So MRO would have to lift their terms mightily, I'd have thought.
Anything that boosts Melrose's share price is good by me. That's what we are all invested for after all? So if the GKN deal fails (and GKN ultimately fails as a result), I know I'm better off where I am. Good luck, whatever.
Been saying that for some time RAC. Seriously, again, if I'd made good profits here, I'd at least take some profits because, without GKN, their prospects are pretty mediocre. Furthermore, this hostile bid has shone the light on MRO's fallibility.
Here's the latest new from Reuters re Dana - not that I'm particularly thrilled by it.
"LONDON (Reuters) - Britains GKN could clinch a merger of its automotive business with Dana Incorporated within two weeks, four sources close to the matter told Reuters, complicating Melroses hostile bid for the FTSE 100 engineering group.
The proposed deal would make it harder for turnaround specialist Melrose to persuade GKN investors about the merits of its 7 billion pound hostile bid, three of the sources said, with one adding that Melrose could drop its pursuit.
Melrose declined to comment.
GKN rejected an unsolicited takeover offer from Melrose in January and set out plans to split its business in two.
Ohio-based Dana, a maker of axles and driveshafts, has hired Barclays to carry out negotiations with GKN, two of the sources said. Barclays declined to comment.
GKN said on March 2 that a combination of its Driveline business with Dana could provide greater value to shareholders than its initial plan to break up the business.
Driveline has Fiat Chrysler and Volkswagen among it customers and posted revenue of 5.3 billion pounds ($7.35 billion) last year, up 15 percent on 2016, while trading profit rose by 14 percent to 377 million pounds.
One of the sources said that Dana was determined to clinch control of the business and would do a better job than Melrose in developing operational benefits.
Dana aims to use its own stock to finance the bulk of the transaction, which one source said could be a possible stumbling block because its shares have lost 19 percent of their value since the start of the year.
Fears that U.S. President Donald Trump will start a trade war could push the stock down further, the source said.
GKN is scheduled to hold a presentation for analysts and investors on its automotive business on March 8, though a deal with Dana is unlikely to be announced this week, the sources said.
A sale of Driveline would see GKN, a mainstay of the British engineering sector, focus on its aerospace division, which supplies components for the Black Hawk helicopter and Eurofighter Typhoon.
Melrose has made only one offer for GKN and has not yet sweetened the terms to encourage shareholders to accept a deal.
In an attempt to quell political criticism, Melrose boss Simon Peckham this week told British lawmakers on parliaments Business, Energy and Industrial Strategy (BEIS) Committee that it would consider making binding commitments about the future of GKN and would not seek to offload any of its units to a buyer who could be deemed inappropriate.
Melrose shareholders are due to vote on its takeover plan at a meeting on March 8."
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