GKN attacks 'short-termist' suitor Melrose's 'lack of experience'

GKN has stepped up its defence against hostile suitor Melrose

By Jack Torrance
The Telegraph

The board of GKN has stepped up its defence against hostile suitor Melrose today, accusing the company of short-termism, lacking relevant experience, and making a "low price and high risk" offer.

[post_ads]In a letter to shareholders, the FTSE 100 engineering giant’s chairman Mike Turner said Melrose’s management was “more focused on financial engineering than real engineering” and said the group’s £7.4bn takeover offer represented a “very low” premium for shareholders.

Mr Turner said Melrose had “very limited experience” in GKN’s sectors of aerospace and automotive engineering, having exited them six years ago, adding: “There is no evidence that Melrose's management has relationships with key customers such as Airbus, Boeing, Fiat Chrysler, Ford and VW.”

The former BAE systems chief executive also said Melrose’s three-to-five year exit strategy was not appropriate for GKN.

He said: “Cars and aircraft are researched, designed, produced and serviced over several decades - your board believes that a short term, private equity-style strategy is not the right way to provide sustained shareholder value in our sectors.”

The scathing attack follows the board’s publication yesterday of its plan to boost GKN’s margins and return £2.5bn to shareholders over the next three years.

Today Mr Turner said that because the takeover would dilute current shareholders’ equity, Melrose would need to deliver 1.76 times as much of an improvement in cash generated to offer the same benefit to shareholders.