Melrose continues to push for £7.4 billion takeover of GKN despite annual loss
Melrose chairman Christopher Miller said his company is still well-positioned for the takeover of GKN.
Turnaround specialist Melrose has reported another annual loss but assured that its takeover target GKN would “gain significantly” by accepting its £7.4 billion bid and joining the business.
Melrose reported a statutory loss of £27.6 million for the year to December 31, having narrowed from a loss of £69.3 million a year earlier.
That was on flat revenues of £2 billion.
The company said it took on “significant” restructuring costs at manufacturer Nortek which it bought in 2016, and was forced to contend with the “structural decline of the core gas turbine market” which affected its Brush business – a maker of electricity generation equipment.
But Melrose chairman Christopher Miller said his company is still well-positioned for the takeover of GKN.
“We are convinced that GKN would gain significantly from becoming part of an enlarged £10 billion UK industrial powerhouse, benefiting from the proven Melrose operating model.”
Melrose said it had already set aside £1.8 million towards the £7.4 billion acquisition in its 2017 accounts.
The company swooped on GKN after profit warnings in October and November following problems at its US aerospace division sent shares tumbling, which sparked a battle as GKN’s board rejected Melrose’s overtures.
GKN has since unveiled a strategic plan that will see it sell off parts of its business to fund a £2.5 billion payout to shareholders as it fights off the hostile takeover.
It has also criticised Melrose’s offer, calling it “low price and high risk” and said the turnaround specialist was “more focused on financial engineering than real engineering”, and that its profitability was not easily understood given the way it booked research, development and provisioning.
However, GKN’s strategic plan was subsequently blasted by Melrose, which said it was “long on adjectives and promises but desperately short on detail”.
Melrose said on Tuesday that it has also entered into a senior term and revolving credit facilities agreement with both Lloyds Bank and Royal Bank of Canada, which are contingent on a successful acquisition.
“The Board believes that GKN is a company in need of fundamental change to reverse its long-term underperformance,” Melrose said.
“We believe GKN will respond to Melrose’s methods and deliver lasting results for all stakeholders.”