Doubts grow over break-up of GKN

£177m wiped off Melrose amid takeover jitters

Around £177m was wiped off the value of Melrose after reports its takeover of GKn may not be going to plan.

Melrose took over the engineering group in a controversial £8bn hostile deal earlier this year, promising to make the business more efficient.

The company specialises in reviving the fortunes of underperforming industrial firms, but critics believe that by taking on GKn it has bitten off more than it can chew.

Simon Peckham, chief executive, had hoped to sell GKn’s Powder Metallurgy arm for £2bn.

But the initial bids have come in significantly below that, at around £1.6bn, according to Sky news.

Shares in Melrose fell 2pc, or 3.65p, at 178.2p.

The battle to take over GKn sparked fears Melrose would bring the curtain down on its proud history. GKn traces its roots back more than 250 years to the napoleonic Wars, when it made cannonballs for the duke of Wellington’s armies. It also helped produce Spitfires during the Second World War.

Investors have also protested against the large rewards to Melrose’s four top bosses, who each took home £42m last year.

The quartet could share in £285m in bonuses if they make a success of the GKn takeover.

Business Secretary Greg Clark had said he would look into whether ministers should block the deal on national security grounds because of GKn’s Ministry of defence contracts.

In a bid to ward off a Whitehall block of the takeover, Melrose agreed it would tell the Government early on if it received bids for parts of the business that might have national security implications.

It also agreed to give the Government a veto over the disposal of defence assets and pledged that it would not sell GKn’s aerospace arm – which makes parts for the uS Black Hawk military helicopter (pictured) – until 2023. It only just succeeded in its bid for GKn in March, winning 52.4pc of a shareholder vote.

reports of the disappointing offers led to speculation that Melrose may put on hold the sale of Powder Metallurgy, which makes components for the car industry.

Private equity firms Apollo and PAI Partners are understood to be among those who tabled bids last week.

Analyst Mark Fielding at rBC Capital Markets said that Melrose is ‘unlikely to sell’ if it feels that ‘uncertain market conditions’ have pushed down the bids.

Melrose declined to comment last night.