Foreign vultures line up to buy UK aerospace engineer
SHARES in GKn hit a high last night as investors bet a bidding war will break out for the embattled engineer.
The company, which dates back to the 18th century and makes parts for fighter jets, Black Hawk helicopters and Audi and BMW cars, rejected a £ 7bn approach from predator Melrose last week.
Both companies yesterday embarked on charm offensives in a bid to convince shareholders that their plans were best for the future of GKn.
US fund manager Vulcan Value Partners, one of GKn’s biggest investors, urged the company to enter talks with Melrose, but added that the current offer was too low.
Analysts said Melrose will need to raise its offer for GKn from the 405p a share proposed last week – and could face a string of rival bids from private equity. American buyout giant Carlyle is said to be weighing up a bid and others such as Blackstone and KKR could also join the fray.
Jonathan Hurn at Deutsche Bank said: ‘We believe Melrose could return with an improved proposal. Also with GKn now in play, other potential acquirers may enter the process. While GKn has not disclosed what it sees as an acceptable offer level per share, we are of the view that 450p would be more acceptable to management.’
Shares in GKn, which jumped 26pc to 420p on Friday after the Melrose proposal was made public, rose another 4.1pc, or 17.4p, to 437.4p yesterday.
The latest share price rise came as GKn’s new chief executive Anne Stevens, a former high-flyer at Ford who officially took over just days before the company rebuffed Melrose’s approach, met investors to persuade them that the management team is best placed to turn the business around.
GKn, which employs 53,000 around the world including 6,000 in the UK, is planning to split its aerospace arm from its cars division as it seeks to bolster its defences against Melrose and other suitors. The company could even sell its aerospace business.
A spokesman said: ‘Melrose’s opportunistic offer to shareholders fundamentally undervalues our company and its prospects and would deprive our shareholders of the full benefits of the value that GKn intends to deliver.’
But Melrose bosses launched their own charm offensive, appealing directly to the City to back their £7bn takeover plan in a series of meetings of GKn shareholders.
In a presentation to investors, Melrose described GKn as ‘an overly complex and under-managed organisation without focus which needs a fundamental change of culture and leadership’.
Warning against GKn’s own plans, the company added: ‘Melrose intends to significantly improve GKn’s businesses as opposed to a hasty break up.’
Andrew Gollan, an analyst at Berenberg, said: ‘We expect Melrose to return with a higher offer for GKn and for it to be accepted. The rejected 405p bid undervalues GKn, in our view, but we believe Melrose has scope to significantly increase its offer by the February 9 deadline.’