Melrose overcomes potential hurdle to GKN acquisition

Turnaround specialist Melrose has raised the stakes in its efforts to convince shareholders at GKN that it is a suitable owner for the business.

The Alcester-based company has been steadily mounting a charm offensive to try and court the GKN shareholders, whom it has said would benefit from seeing GKN housed within the portfolio of Melrose businesses.

It has currently bid £7.4bn for the Redditch-based group, although the GKN board has said the offer woefully undervalues the business and has recommended that shareholders take no action on the approach.

One of the obstacles to any takeover was thought to be regulatory clearance from authorities in the United States, where GKN is involved in sensitive defence contracts.

However, in a fresh statement it said the US Federal Trade Commission had granted early termination of the usual waiting period under the Hart Scott Rodino Act, thereby providing clearance in respect of US anti-trust rules.

In addition, it said the Canadian Competition Bureau had issued a no-action letter to Melrose stating it did not intend to call in any takeover under the terms of its Competition Act.

The move effectively provides clearance of any takeover in respect of Canadian anti-trust regulations.

In a further move, Melrose is also sending out its full year results statement to GKN shareholders.

Melrose used the publication of its results earlier this month to stress that GKN would be more profitable under its ownership.

Christopher Miller, chairman of Melrose Industries, said in the results statement: “We are convinced that GKN would gain significantly from becoming part of an enlarged £10 billion UK industrial powerhouse, benefitting from the proven Melrose operating model.”

The results showed that Melrose made a £257.7m underlying pre-tax profit, although its statutory results showed it incurred a loss of £27.6m, largely due to restructuring costs within one of its portfolio companies.