GKN makes plea to shareholders as it continues to fight off bid from Melrose

GKN HAS written to shareholders to warn over the “entirely opportunistic” takeover bid by Melrose, saying its inexperienced management team and shortterm business model are “inappropriate” for the business.

The engineering giant’s letter detailed what it perceived as shortcomings of Melrose’s £7.4bn offer while highlighting the benefits of its new strategic plan.

“The Melrose offer is not a good deal – it is low price and high risk,” the letter, signed by GKN chairman Mike Turner, said.

“On the basis of its most recent share price, Melrose claims its premium is 22 per cent.

“By comparison, precedent FTSE 100 takeovers have an average premium of 43 per cent,” he explained, adding that Melrose has paid “materially higher premiums in each of its prior public takeovers”.

He also pointed to Melrose’s “weaker” credit profile and “materially higher proposed leverage” as a point of risk for shareholders, while claiming that the turnaround specialist’s management team “lacks relevant experience” and that “its short-term business model is inappropriate for GKN”. Commenting on GKN’s letter, Melrose chairman Christopher Miller said it was “another attempt to distract from the real issue”.

“Quite simply, can a GKN board with a self-confessed record of under-performance be trusted to re-invent itself into an agent of fundamental cultural change? We firmly believe the GKN team cannot.”

He said Melrose has a proven track record in helping build up sustainable businesses, and assured the company “will not cut corners in making the necessary investment that we believe GKN’s businesses need”, and would not “indulge in a hasty fire-sale of the businesses the GKN board has identified as noncore”.

“We are a quoted British company which finances itself on investment grade terms.”