Melrose the victor in City's €9.2bn battle of the decade


MELROSE has won control of GKN after an enthralling battle as the blue-chip engineer failed to fight off the £8.1bn (€9.2bn) hostile bid.

The turnaround investor secured the aerospace and automotive parts company with its cash-and-shares offer, which went down to the 1pm deadline yesterday for shareholders to vote.

Veteran industry analyst Sandy Morris, at Jefferies, described the tussle for GKN as "remarkable", with insiders on both sides describing the investor vote as being on a knife-edge.

Melrose won the backing of 52.43pc of investors for its cash and paper bid which offered 1.69 shares in the combined business and an 81p payment. The deal gives existing GKN shareholders 60pc of the merged business.

Christopher Miller, chairman of turnaround investor Melrose, said he was "delighted" to have been backed by GKN investors for what he called his company's plan to create a "£10bn industrial powerhouse".

His FTSE 250 business, which works under the tag-line of "buying, improving and selling" underperforming engineering companies, has been eyeing up GKN for more than a decade.

Melrose finally pounced in January, pledging to improve margins, claiming the existing management had failed to deliver on promises for years.

GKN - led by newly installed chief executive Anne Stevens - countered with its own turnaround plan. This involved merging its Driveline car parts arm with US rival Dana in a £4.5bn (€5.1bn) deal, selling its powder metallurgy unit, and becoming a pure aerospace business - all while paying out up to £2.5bn to investors. The fight - with MPs, unions and pension schemes all weighing in - has been the most intense the City has seen since Kraft's swoop on Cadbury a decade ago.

GKN supplies parts for the drivetrains of half of all new cars and also has valuable and sensitive aerospace and defence contracts. Claims and counter-claims between the two camps have been flying since the bid was announced, with fears that a change of control could see major customers - including Airbus - abandon the company, that national security could be harmed or the deal could be blocked because of it. Widespread job losses were another concern, as Melrose seeks to improve its performance.

Earlier this week Greg Clark, the UK business minister, wrote to Melrose demanding it hold on to its aerospace arm for five years if it succeeded. The bidder pledged to keep the company's headquarters in the UK, retain a London listing and spend £1bn on research and development.

Mr Miller said that he looked forward to working with GKN's 60,000 global employees - 10pc of whom are in the UK - adding: "Let me assure you that GKN is in very good hands."

Shares in Melrose rose 3.4pc to 231p, valuing its cash and paper offer for GKN at about 471p last night, while GKN's stock shot up towards the offer price, climbing 9.5pc to 463p.

"I've never seen a bid like this in 31 years in the City," Mr Morris said, adding that usually it is clear long before the deadline which side has won. Speculation swirled that one of GKN's "passive" investors - which would back the incumbent management under convention - had swapped sides, tipping the vote towards the bidder.

The pressure is now on Melrose to explain how it will run GKN. GKN yesterday urged investors to accept Melrose's offer now to avoid becoming minority shareholders in an unlisted business. Melrose has said it will delist GKN from the Stock Exchange should the offer become wholly unconditional, with 75pc of acceptances. (© Daily Telegraph, London)