Dowlais goes downhill on its debut

Last week’s listing of Dowlais, spun out of Melrose Industries, proved “disappointing”, says Robert Lea in The Times. Shares in the company, which has sales of £5bn a year and contains the automotive businesses of GKN (taken over by Melrose in 2018), slipped by a fifth in their first day of trading. Brokers have blamed the “wave of selling” by index-tracking funds: Dowlais, unlike Melrose, sits outside the FTSE 100 index.

Still, at least the initial public offering (IPO) goes against the trend towards “overseas and private equity deals”, which have “hollowed out” Britain’s industrial sector, says Alex Brummer in the Daily Mail. The “scalding experience” of Melrose’s hostile 2018 takeover of GKN, which resulted in the government imposing several conditions on the deal, must have played “some role in the decision to IPO rather than sell” to the US. Good: “A valuable piece of British technology and some important R&D [research and development] has been saved for the time being.”

Melrose’s motives in listing Dowlais may have been pragmatic, not patriotic, says Lex in the Financial Times. With automotive-parts valuations close to ten-year lows, Melrose may have deemed a sale of the company “costly”. Note too that shares in the remaining Melrose aerospace business surged while Dowlais’ stock slipped. “The combined value of the two rose 5% on the day.” Dowlais, which specialises in drivetrains, which get the power from the engine to the wheels, is also “well placed” to benefit from “the accelerating shift to electric vehicle manufacturing”.