GKN launches scathing attack on “novice” Melrose
Engineering giant GKN today attempted to put the record straight by taking apart a string of claims by hostile suitor Melrose.
In a statement entitled “Rebutting Melrose’s misleading statements”, the FTSE 100 firm covered its planned motor merger with Dana, strategy for its aerospace arm, research and development spend and pension plans.
It also aimed both barrels at Melrose’s claims it has the best team to realise GKN’s full potential. The firm said:
Melrose is a novice in automotive. It has no experience as a tier one supplier and has nowhere near the experience of the combined Dana management team and the senior GKN Driveline team
“Melrose is little better placed in aerospace. Melrose has minimal experience in aerospace as well and has not been in the industry since it sold its component business, McKechnie Aerospace, in 2007 after less than two years of ownership. Its lack of knowledge is evidenced by its attempts to deal with GKN’s major customers.”
The latest round in the GKN/Melrose ding-dong comes as GKN’s finance chief said yesterday evening GKN is exploring an operational overhaul through disposals and acquisitions.
The fate of the engineering giants was “on a knife-edge” before the 29 March shareholder vote deadline, Jos Sclater told the Financial Times.
Read more: GKN slams Melrose for “misleading statements”
On the Dana merger
Melrose claimed GKN’s $6.1bn merger of its motor division with US firm Dana was “hasty and ill-thought-through”.
GKN said it had been exploring a tie-up with Dana “for a number of years”, with discussions taking place last June, well before Melrose made its first approach.
Read more: Melrose lowers GKN shareholder threshold and confirms £1bn pension plug
Aerospace copy-cats
GKN hit back at suggestions it had copied many of Melrose’s plans for its aerospace business. GKN said changes were identified “back in 2017”.
Melrose has so far failed to disclose any plans for GKN’s Aerospace business; it is difficult to understand how they can claim GKN copied anything.
Read more: Dana seeks to keep $6.1bn GKN merger on track with London listing
R&D
Turnaround specialist Melrose has said GKN’s investment in research and development is approximately half of its own capital expenditure.
GKN reckoned Melrose has spent £230m on Nortek and Elster over the past five years, compared with £262m spent by UK engineering stalwart in 2017 alone.
Read more: Melrose is poised to pour £1bn into GKN’s pension fund
Pensions
Allegations GKN has reduced its pension contributions were rebutted, with the firm saying top-ups have increased from £100m in 2015 to £344m in 2017.
It added:
It is remarkable that, eleven weeks since the start of their hostile takeover approach, Melrose has yet to reach agreement with the Trustees. Agreeing appropriate arrangements in short order would surely have been a priority for any responsible custodian of pensioners’ interests
Read more: Major GKN investor Jupiter joins Airbus to oppose Melrose’s hostile bid
“Lacks knowledge and experience”
GKN chief executive Anne Stevens said: “Our shareholders have an important choice to make, and we believe an independent GKN is the right choice. We are confident our new strategy will maximise the value of GKN and we are working with urgency to deliver it.
“In scale and nature, GKN is completely different from any business Melrose has ever bought. Melrose lacks the knowledge and experience to manage GKN successfully and has absolutely no plan for the business. Melrose is the high-risk choice. Melrose’s offer does not come close to reflecting GKN’s true value and I urge shareholders to reject it.”
Melrose has been approached for comment.
Read more: GKN backs Airbus warning against Melrose takeover