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You can find the current article at its original source at https://www.theguardian.com/business/2018/mar/26/gkn-tells-shareholders-to-choose-us-group-dana-over-melrose
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| GKN retracts claims of shareholder support against Melrose bid | GKN retracts claims of shareholder support against Melrose bid |
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| The UK engineering company GKN has been forced to retract statements suggesting it has backing from shareholders to fend off a hostile £7.9bn takeover bid from the turnaround specialist Melrose. | The UK engineering company GKN has been forced to retract statements suggesting it has backing from shareholders to fend off a hostile £7.9bn takeover bid from the turnaround specialist Melrose. |
| At the weekend, GKN executives gave bullish interviews in which they expressed confidence that investors would back the industrial group, including pointed references to long-term shareholders supporting its strategy. Short-term investors, including hedge funds, control about 25% of GKN. | At the weekend, GKN executives gave bullish interviews in which they expressed confidence that investors would back the industrial group, including pointed references to long-term shareholders supporting its strategy. Short-term investors, including hedge funds, control about 25% of GKN. |
| GKN rowed back on those interviews on Monday. In a statement to the London Stock Exchange, it said: “These statements of shareholder support in respect of GKN were not verified and are hereby retracted.” | GKN rowed back on those interviews on Monday. In a statement to the London Stock Exchange, it said: “These statements of shareholder support in respect of GKN were not verified and are hereby retracted.” |
| GKN began as the Dowlais Ironworks Co in south Wales in 1759. By the mid-19th century it had become the largest ironworks in the world, producing almost 90,000 tonnes of iron a year. | |
| A reverse takeover pushed through by entrepreneur Arthur Keen created Guest, Keen & Co. Two years later, Keen drove through the takeover of a reluctant Nettlefolds Ltd and the enlarged company became Guest, Keen & Nettlefolds. It was the largest iron, steel and coal group in the country. | |
| During the first half of the 20th century GKN became heavily involved in wartime production, while also making its first move into the emerging motor industry. It produced Spitfires, a specialised tank for the D-day landings and millions of steel helmets. | |
| GKN emerged from the second world war as Britain’s biggest steel producer but was virtually bankrupt. | |
| Faced with the Labour government’s drive to nationalise the steel industry, GKN gradually withdrew from steel over the next 20 years. It pushed into the automotive industry. | |
| The group made the first loss in its history; it soon expanded globally. In 1988 it acquired a stake in Westland, the British helicopter and aerospace manufacturer, and moved into aerospace technology. | |
| GKN focused on four businesses: aerospace, Driveline, powder metallurgy and land systems. It was relegated from the FTSE 100 index. | |
| GKN issued a series of profit warnings after writedowns at its North American aerospace division and its chief executive designate Kevin Cummings was ousted. | |
| Melrose made a hostile £7bn cash-and-shares takeover bid, upped to £8bn in March. Non-executive director Anne Stevens, a former Ford executive, became GKN’s new CEO. | |
| GKN struck a $6.1bn (£4.4bn) deal on 9 March to merge its automotive business with the US firm Dana in an attempt to fend off the Melrose bid. | |
| Shareholders have to decide whether to accept or reject the bid by 1pm on 29 March. Melrose needs 50% plus one share support. | |
| The Sunday Telegraph had quoted Anne Stevens, the GKN chief executive, as saying she was “convinced investors will back [GKN]”. | The Sunday Telegraph had quoted Anne Stevens, the GKN chief executive, as saying she was “convinced investors will back [GKN]”. |
| The Sunday Times quoted Jos Sclater, the finance director, as saying that “long-only shareholders are mostly supportive of existing management, and understand that the Dana deal and becoming a pure play aerospace company has, longer term, significantly more value than the Melrose bid”. | The Sunday Times quoted Jos Sclater, the finance director, as saying that “long-only shareholders are mostly supportive of existing management, and understand that the Dana deal and becoming a pure play aerospace company has, longer term, significantly more value than the Melrose bid”. |
| As the battle heated up, GKN on Monday sought to persuade shareholders to back an alternative deal with Dana by saying it would receive more cash from the US company and would return £700m to shareholders as soon as possible. | As the battle heated up, GKN on Monday sought to persuade shareholders to back an alternative deal with Dana by saying it would receive more cash from the US company and would return £700m to shareholders as soon as possible. |
| GKN shares rose 0.4% to 430.6p in early trading, with the Melrose bid valuing GKN at 460.7p. | GKN shares rose 0.4% to 430.6p in early trading, with the Melrose bid valuing GKN at 460.7p. |
| Investors have to decide by 1pm on Thursday whether to support the offer from Melrose or the GKN management plan to spin off its automotive business and merge it with Dana, leaving GKN focused on aerospace. | Investors have to decide by 1pm on Thursday whether to support the offer from Melrose or the GKN management plan to spin off its automotive business and merge it with Dana, leaving GKN focused on aerospace. |
| Shareholders are divided, with those officially backing Melrose accounting for nearly 10% of the shareholder base, compared with 9% for those supporting the GKN board. Elliott Advisors and Aviva Investors support the Melrose takeover, while Columbia Threadneedle and Jupiter Asset Management are backing GKN’s plan. | Shareholders are divided, with those officially backing Melrose accounting for nearly 10% of the shareholder base, compared with 9% for those supporting the GKN board. Elliott Advisors and Aviva Investors support the Melrose takeover, while Columbia Threadneedle and Jupiter Asset Management are backing GKN’s plan. |
| GKN’s statement prompted Melrose to make a further appeal to shareholders. Christopher Miller, the Melrose chairman, urged GKN investors to accept its offer: “The alternative is the reckless dismemberment of a business and needless value destruction for all stakeholders. | GKN’s statement prompted Melrose to make a further appeal to shareholders. Christopher Miller, the Melrose chairman, urged GKN investors to accept its offer: “The alternative is the reckless dismemberment of a business and needless value destruction for all stakeholders. |
| “Today’s tweak of terms on the sale of Driveline to Dana does not offset the 7% reduction in equity value since the announcement. The last-minute attempts of claiming shareholder support that then had to be retracted [are] a sign of desperation.” | “Today’s tweak of terms on the sale of Driveline to Dana does not offset the 7% reduction in equity value since the announcement. The last-minute attempts of claiming shareholder support that then had to be retracted [are] a sign of desperation.” |
| Melrose promised to more than double shareholders’ investment by creating additional value of more than £6.5bn, or 220p per GKN share. | Melrose promised to more than double shareholders’ investment by creating additional value of more than £6.5bn, or 220p per GKN share. |
| But Mike Turner, the GKN chairman, reiterated to investors that the company’s true value was more than £5 a share and that Melrose’s final offer “fundamentally undervalues your company and should be rejected”. | But Mike Turner, the GKN chairman, reiterated to investors that the company’s true value was more than £5 a share and that Melrose’s final offer “fundamentally undervalues your company and should be rejected”. |
| GKN said on Monday that Dana had increased the amount of cash payable by $140m (£100m). GKN will now receive $1.77bn in cash after deducting $1bn for the transfer of the pension deficit to the Dana-GKN Driveline group. GKN shareholders will continue to own 47.25% of the combined company, which would be listed on the New York and London stock exchanges. | GKN said on Monday that Dana had increased the amount of cash payable by $140m (£100m). GKN will now receive $1.77bn in cash after deducting $1bn for the transfer of the pension deficit to the Dana-GKN Driveline group. GKN shareholders will continue to own 47.25% of the combined company, which would be listed on the New York and London stock exchanges. |
| GKN plans to return up to £700m of cash to shareholders “as soon as practicable” after the deal with Dana – the first instalment of the up to £2.5bn cash return programme was announced previously. | GKN plans to return up to £700m of cash to shareholders “as soon as practicable” after the deal with Dana – the first instalment of the up to £2.5bn cash return programme was announced previously. |
| Turner said: “GKN has reinvented itself numerous times in its 250-year history. We are confident that, following the Dana transaction and the non-core disposals, GKN will become a pure play aerospace company with a strong balance sheet, our pension challenges behind us and a clear plan for delivering leading margin performance.” | Turner said: “GKN has reinvented itself numerous times in its 250-year history. We are confident that, following the Dana transaction and the non-core disposals, GKN will become a pure play aerospace company with a strong balance sheet, our pension challenges behind us and a clear plan for delivering leading margin performance.” |
| Analysts at Numis said the Dana transaction was the right deal, but at the wrong price and the wrong time. “The combination of Dana and GKN Driveline to create a world leader in auto driveline has significant strategic merits. The issue we have is that the business is being sold too cheaply and too early.” | Analysts at Numis said the Dana transaction was the right deal, but at the wrong price and the wrong time. “The combination of Dana and GKN Driveline to create a world leader in auto driveline has significant strategic merits. The issue we have is that the business is being sold too cheaply and too early.” |
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