Today, GKN’s board heightened its defence against Melrose, its hostile suitor. The board accused the company of not having relevant experience, short-termism, and offering a “low price and high risk” bid.
In a letter that was addressed to shareholders, Mike Turner, chairman of the FTSE 100 engineering giant, said that the management of Melrose was “more focused on financial engineering than real engineering.” He said that the £7.4bn takeover offer of the group represented a “very low” premium for its shareholders.
Turner said that Melrose had “very limited experience” in the sectors of automotive engineering and aerospace of GKN, having exited them approximately six years ago. He added: “There is no evidence that Melrose’s management has relationships with key customers such as Airbus, Boeing, Fiat Chrysler, Ford, and VW.”
The former systems chief executive of the BAE also said that the three-to-five year exit strategy of Melrose was not suitable for GKN.
He stated: “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 brutal attack follows the publication of the board yesterday regarding its plan to improve the margins of GKN and return £2.5bn to shareholders over the coming three years.
Today, Turner stated that since the takeover would dilute the equity of the current shareholders, Melrose would be required to deliver 1.76 times as much of an improvement in cash that is generated in order to offer the same benefit to its shareholders.