Manufacturing turnaround specialist Melrose plans to meet GKN shareholders to convince them of the benefits of its £7bn takeover offer, rejected by GKN management last week.
The UK-based engineering firm rejected Melrose’s offer as “entirely opportunistic” and set out plans to split its business in two.
However, Melrose’s pursuit of GKN is dogged and it is now spelling out what it believes are strong arguments to ‘unlock the potential’ within GKN.
Melrose describes GKN’s current position as an “overly complex and under-managed organisation without focus which needs a fundamental change of culture and leadership.” It also points out that GKN has a history of missed margin targets going back to 2011.
Repurpose the business
Melrose insists it can ‘re-energise and re-purpose ‘GKN's operations to enable them to exceed GKN's own top-end group trading margin target of 10%. “Melrose intends to significantly improve GKN's businesses as opposed to a hasty break up,” the company argues in its latest investor presentation.
Simon Peckham, Chief Executive of Melrose, spelled out to GKN shareholders what he saw as the prime options.
“They can elect to sell in the market right now for a substantial premium to Friday's opening price - which itself has increased following a rise in the price of Melrose's shares. Or they can choose to combine their business with ours and have the majority share in what we are confident will be a business capable of significant value enhancement!”
He added: “This is in stark contrast to a break-up of the business by a GKN management team which has consistently underperformed or a hasty possible sale of parts or all of the business to third parties who don't share our objectives of creating long term value for shareholders."
Share price boost
GKN’s share price rose last week on the strength of takeover talks and they also rose in mid-morning trading today as Melrose upped the ante in its chase for GKN. The share price was up just over 3.5% to 435.12
Analysts at Berenberg expect Melrose to return with a higher offer for GKN and for it to be accepted