The future of the UK’s biggest engineering group hangs in the balance as GKN (GKN) shareholder votes are counted.
The rough £8.1bn hostile takeover attempt pitched by engineering turnaround specialist Melrose Industries (MRO) has become the most bitter bid battle in recent memory. Not since the controversial hostile takeover of Cadbury’s by Kraft of the US back in 2010 have stock market passions run so high.
TOO CLOSE TO CALL
‘GKN has used everything in its arsenal to fight off turnaround specialist Melrose, but it’s still far from clear whether it will be enough,’ says Lee Wild, head of equity strategy at Interactive Investor.
Wild believes this could even have longer term ramifications for UK takeover rules.
The decision looks too close to call.
We could know the outcome later today, but don’t bank on it. ‘It may even be that the result is not publicly announced until after the market close, forcing investors to wait over the Easter holiday before being able to act on the outcome,’ reckons Wild.
FEW CLUES FROM SHARE TRADING
GKN's share price is marginally up on Thursday at 425.6p, about 7.5% off the Melrose offer price of 460.7p. A much higher share price today would imply a victory for the Melrose offer, a significantly lower one would point to backing for the plans pitched by the GKN management.
Shares in Melrose are fractionally off at 222.3p, so little help there.
A GKN victory is widely tipped to trigger hefty selling of its shares. That’s because many investors believe its plans, including the merger of its automotive arm with US firm Dana, will take far longer to feed through in returns terms.
Yet critics of the Melrose offer claim its cost-cutting business model could damage GKN’s longer-term future.
But with votes now cast the future of this 260-year old FTSE 100 engineer is in the lap of the gods.
