Blow to GKN as US ‘vultures’ back takeover
THE future of British engineering stalwart GKN hung in the balance last night after an aggressive New York hedge fund backed an £8.1billion hostile takeover.
Investment firm Elliott, which controls a 3.4 per cent stake in GKN, yesterday threw its weight behind turnaround specialist Melrose in the battle for control of the manufacturer.
Opponents of the takeover warn that Melrose is simply trying to strip the 259-year-old firm’s assets so directors can secure a £285million bonus.
Elliott has been dubbed a vulture fund by critics over its aggressive tactics. It has been building its stake in GKN ever since Melrose launched its bid – a strategy that will enable it to make a quick buck should the takeover go ahead.
It came as two major car manufacturers, which account for £800million of GKN’s sales, voiced opposition. In an indication of rising concern that its opportunity is slipping away, Melrose issued a last desperate plea for support.
Major GKN shareholders including Lancaster Investment Management, Jupiter Asset Management and Columbia Threadneedle have come out in defence of the engineering firm. Airbus – its single biggest customer – has warned it will be ‘practically impossible’ to work with the firm if Melrose buys it.
GKN says it will sell its partsmaking arm Driveline to US supplier Dana if it can fight off Melrose. Dana is set to list its shares on the London Stock Exchange if this £4.2billion deal goes ahead, giving British investors more control.
A senior executive at one top European carmaker said: ‘We are much more comfortable with a long-term, wellrespected industry investor like Dana than someone with a private equity-style buy-andsell approach whose shortterm outlook will influence our purchasing decisions.’
ADS, the aerospace and defence industry trade body, called for the deal to be blocked on national security grounds.
Shareholders who own more than half of GKN’s stock must give their backing to the deal by the end of Thursday next week if it is to go ahead.
Melrose chairman Christopher Miller wrote to GKN investors yesterday in a final effort to get them onside.
He said: ‘Only the Melrose team can transform GKN into the manufacturing powerhouse that it could and should be.’ Elliott argued that GKN’s ‘recurring historical underperformance was self-inflicted’.
The hedge fund was famously branded a ‘financial terrorist’ for buying up Argentine government debt while the country’s economy collapsed, then demanding payment in full.
Other victims include investment manager Alliance Trust, whose chairman and chief executive were forced out after a vicious public campaign.
Melrose is still waiting for permission from US authorities for the deal. It now says it will push on even if their April 17 deadline is missed.
Alex Brummer – Page 107