For connoisseurs of City takeover battles, the fight for the soul of GKN has been a cracker.
A grand old name of British industry, with prestigious customers and a key role in the UK economy, slugging it out with a brash rival, two management teams going at each other hammer-and-tongs and with numerous politicians, trades unions, pension trustees and newspaper columnists lobbing bricks in every direction.
The fight made the front page not just of the Financial Times but also the Daily Mail.
This is how takeover bids used to be fought in the go-go 1980s, when buccaneering tycoons such as Lord Hanson strode the globe, seizing underperforming businesses and shaking them up.
The Hanson reference is particularly apt as Christopher ‘Jock’ Miller, the co-founder and executive chairman of Melrose, learned his trade working for the feared corporate raider.
The approach he and his lieutenants David Roper and Simon Peckham, respectively the executive vice-chairman and chief executive of Melrose, have taken is straight out of the Hanson playbook.
It is one that is refreshingly straight-forward.
Hostile bids are rare these days because the Takeover Panel is quick to impose ‘put up or shut up’ deadlines on companies whose interest in buying another has become public.
It means more deals are agreed on a friendly consensual basis.
That was never going to be the case here.
Not when fishing fanatic Mr Miller and Mr Roper – nicknamed ‘The Grinder’ for his meticulous grinding through company accounts in search of hidden value – were up against Mike Turner, the combative chairman of GKN, a man who loves a scrap every bit as much.
This was not a situation to be settled over Earl Grey in china teacups in a City banking parlour.
It was a proper bare-knuckle fight out on the cobbles. The irresistible force meets the immovable object.
And here it is only appropriate to praise Mr Turner, a Manchester United fan who never dissuades one from thinking he might well have been involved in fisticuffs on the Stretford End in his youth, and his team.
While the bid attracted massive opposition from politicians and unions for Melrose’s ‘asset stripping’ reputation, the bigger story would actually have been if GKN had retained its independence, which it came exceptionally close to doing.
As one of GKN’s advisors admitted during the last 24 hours: “At the start of this process, we were dead.”
:: Melrose claims victory in GKN takeover battle
The company was a sitting duck, its share price having collapsed following a brutal profits warning that put paid to the hopes of its CEO-designate, Kevin Cummings, from taking up the role.
Leaderless and down on its luck, it was also being targeted by a business that, having achieved the third best return to shareholders in the FTSE-350 – some 3,014% over 15 years – started with a huge City fan club and points on the board.
Veteran US industrialist Anne Stevens, one of GKN’s non-executive directors, was persuaded by Mr Turner to become chief executive and, from a standing start, she and her colleagues put up a robust defence that forced Melrose to raise – or ‘bump’ in the City jargon – its offer.
Some of the defence strategy was a bit all over the place: labelling Melrose as break-up specialists when GKN was in the process of selling its automotive arm to an American company at a discount to the value it ascribed to the business- displayed considerable chutzpah, particularly when accompanied by the sale of the Powder Metallurgy division, the third and least well-known of the company’s businesses and regarded by many as a hidden jewel.
Had GKN won the day, it would have been broken up considerably more early than it will under Melrose, which has promised Greg Clark, the Business Secretary, it will keep GKN’s aerospace arm for at least five years.
Mr Clark, who also prised a commitment on investment in apprenticeships from Mr Miller and his colleagues, was not the only one to obtain valuable concessions from Melrose.
The trustees of the GKN pension schemes did a magnificent job in getting Melrose to commit to plough £1.1bn into the pension scheme – securing the retirement incomes of 34,000 scheme members, including 17,000 former employees who are already retired.
That was no mean feat.
It may not feel like it to the 59,800 GKN employees worldwide, particularly the 6,000 in its home country, but this process is how capitalism is supposed to work.
The managements – one bidder, one target – being forced to explain to the owners of those companies, the shareholders, why their vision for GKN was the right one.
Why their plans are best for all stakeholders – customers, employees and pensioners, as well as the shareholders.
It falls to Mr Miller and his colleagues to prove that.
GKN’s admission of defeat this evening made the point, as GKN has repeatedly stated, that Melrose’s offer undervalues it.
However, with Melrose paying largely in shares, GKN investors will have the opportunity to share in any upside created by the Melrose team.
Employees, meanwhile, might like to study the testimonies of workers at some companies previously owned by Melrose – which attest not to asset-stripping and brutal cost-cutting but actually to investment in hiring and in research and development.
The middle word in the Melrose corporate slogan, ‘Buy, Improve, Sell’, has been rather over-looked in this process.
Whisper it gently – but this could just be the start of a bright future for many GKN employees.
From – SkyNews
