GKN shareholders accept Melrose Industries' £8.1bn hostile bid

GKN shareholders have accepted turnaround specialist Melrose Industries' £8.1bn bid for the engineer, ending a two-and-a-half month saga that has involved intervention from the government and countless tit-for-tat exchanges between the two companies.

Melrose, which has been locked in a bitter war of words with GKN since its approach was first announced back in January, said in a statement that it received valid acceptances representing around 52.4% of the voting rights of GKN. Melrose had set its acceptance condition for the takeover at 50% plus one share.

"Accordingly, Melrose is pleased to announce that the acceptance condition has today been satisfied and that its offer has therefore become unconditional as to acceptances.

"GKN shareholders who have not accepted the offer are urged to do so as soon as possible in accordance with the instructions set out in the final offer document."

Undoubtedly crestfallen after their efforts to resist the deal, the GKN board, though still insisting to the very last that the offer "fundamentally undervalues" the business, said it "now recommends that, in the event that the offer is declared wholly unconditional by Melrose, shareholders accept the offer".

Otherwise, if Melrose's level of acceptances rises from 52.4% to 75%, Melrose would acquire control of GKN and has stated that it would then take steps to delist the company, which could leave shareholders with a minority interest in an unlisted company. The offer will remain open for acceptance until further notice, and not less than 14 calendar days' notice will be given in respect of the closure of the offer.

Melrose chairman Christopher Miller, who promised on Wednesday to maintain research spending and keep the business based in the UK, said: "We are delighted and grateful to have received support from GKN shareholders for our plan to create a UK industrial powerhouse with a market capitalisation of over £10bn and a tremendous future.

"We are looking forward to working with GKN's talented workforce and to delivering for customers and all stakeholders. Melrose has made commitments as to investment in R&D, skills and people and we are very excited about putting these into action.

"Let me assure you that GKN is entering into very good hands.

"We would like to thank our shareholders for their continued support of the Melrose strategy thus far. We are full of enthusiasm as we begin this next stage of the Melrose story and look forward to creating substantial value for our shareholders, old and new."

The path to transaction completion should be straightforward now, said Olivetree Financial said, with Melrose having last week pledged to waive the conditions for clearance from the Committee on Foreign Investment in the United States and Defence Security Service.

"The only wrinkle could potentially come in an unlikely scenario where CFIUS/DSS blocks the transaction before 17 April, but it remains likely that the Takeover Panel would force Melrose to close - given that they have already told the market they were willing to waive this requirement.

"Expect to see GKN management shift its recommendation to begrudgingly advise shareholders to now tender to Melrose. History tells us that acquirers in this situation tend to get to the magic 90% tender level and then are able to effect a full squeeze out and own the target fully."

At 1610 GMT, Melrose shares were up 0.8% to 225p and GKN shares were up 6.9% to 452.30p.

Britain's largest union, Unite, was quick to respond to the news, saying it would "hold Melrose’s feet to the fire" and call on the government to intervene on national defence grounds.

Unite assistant general secretary for aerospace Steve Turner said: "With the UK defence secretary Gavin Williamson having expressed concern over the takeover’s impact on UK defence interests, we continue to urge business secretary Greg Clark to use his powers under the Enterprise Act and call it in on national defence grounds.

"This takeover has put into stark relief the inadequacy of the UK’s takeover rules which put the interests of short-term speculators over those of the workforce and long-term investors."

Unite assistant general secretary for manufacturing Tony Burke said it was "deeply disappointing" that shareholders had, by the slimmest of margins, put making a quick profit ahead of the long-term future of one of the UK’s most successful engineering companies.

"We have deep concern about Melrose’s short-term approach, which we believe could see the piecemeal break-up of GKN and undermine hopes of a coherent industrial strategy for the UK.

"Unite remains of the view that the concessions Melrose has given are inadequate and that question marks remain over whether they are enforceable. The onus is now on the business secretary Greg Clark to go further and step in."