Melrose appends another chapter to long-winded war of words with GKN

As if investors weren’t tired of it already, the board of Melrose felt it necessary on Thursday afternoon to respond to a document issued by GKN earlier in the day, in which the latter defended its decision to pursue a new strategy in a bid to return £2.5bn to shareholders over the next five years.

Market commentators largely saw the £2.5bn promise as an attempt by GKN’s board to convince shareholders not to give in to Melrose’s £1.3bn cash offer.

Melrose said on Thursday that nothing in GKN’s defence changed its view, which is that the fundamental transformation in culture and approach it believes is necessary to improve GKN would only be possible with a change of control, new leadership and “fresh thinking”.

It asserted that GKN was continuing its fixation with sales performance at the expense of profit and cash.

Melrose said it would be writing to GKN shareholders in due course with its detailed response.

“Today's document from GKN is another attempt to distract from the real issue,” said Melrose chairman Christopher Miller.

“Quite simply, can a GKN board with a self-confessed record of underperformance be trusted to reinvent itself into an agent of fundamental cultural change?

“We firmly believe the GKN team cannot.”

Miller said Melrose had demonstrated that it builds businesses to long term health.

He said it invested almost double in percentage terms in expensed research and development than GKN does by itself.

“In addition, on average we spend fully a third of our original equity purchase price on capital expenditure and business improvement.

“We will not cut corners in making the necessary investment that we believe GKN's businesses need.

“Nor will we indulge in a hasty fire-sale of the businesses the GKN board has identified as non-core.”

Miller told GKN shareholders and the market that Melrose is a quoted British company which finances itself on investment grade terms.

“We are an impeccable custodian of pensions. We recognise the importance of all GKN stakeholders.

“We believe shareholders will view today's document as a sideshow and focus instead on the main issues of value creation and responsible ownership, in which Melrose excels.”