Government Intensifies Scrutiny on £7.4bn Hostile Bid of Melrose for GKN

By RobMag66  [CC BY-SA 3.0] via Wikimedia Commons

The government has turned up its focus on a hostile bid for one of the largest automotive and aerospace components manufacturers in the United Kingdom, the Worcestershire-based company, GKN, which is valued at £7.4bn.

Even though no official investigation has been initiated, reporters understand that Mike Turner, the chairman of GKN, has been ordered to attend a meeting with the permanent secretary for the Department for Business, Energy and Industrial Strategy (Beis), Alex Chisholm.

Last week, it was disclosed that both GKN and Melrose, its turnaround company suitor, had met with Greg Clark, the business secretary, amid government fears over national security. The aerospace branch of GKN is heavily involved in defence projects, including the manufacture of the parts for the F-35 stealth fighter of the United Kingdom and the new main B-21 bomber of the United States of America, and the government is able to intervene in deals which involves public interest concerns that are surrounding financial stability, media plurality, or national security.

Currently, Melrose is the only bidder to have made a firm offer for the FTSE 100-listed GKN, even though others which include Carlyle, a private equity house are understood to be keeping a close eye on the developments.

Melrose has a record of turning around struggling industrial companies just like GKN and selling them on for a huge profit. It wants to merge GKN with its own existing business and is scheduled to publish its formal offer document between the 1st and the 14th of February which could feature a sweetened proposal.

The shareholders of GKN have been given with a cash-and-paper offer, which would offer them a 57 percent stake in the newly combined business and an 81p per share of cash in hand.

GKN itself is throwing up its defences against the antagonistic bid, asking shareholders to place their faith in the company’s plan to separate the aerospace and automotive branches into two separate businesses.

A spokesperson from the government has said that it is “closely monitoring” the situation.