GKN shareholders accept Melrose’s £8bn hostile takeover

GKN has lost its fight to retain independence after the engineering firm’s shareholders accepted an £8bn hostile takeover approach by turnaround specialist Melrose.

The decision by investors to back Melrose follows a two-month battle for control of the FTSE 100 company, which makes parts for the aerospace and automotive industries.

Q&A

What is GKN?

GKN is a global engineering business based in Redditch, Worcestershire. It employs nearly 60,000 people across 30 countries.

Once known as Guest, Keen and Nettlefolds, the firm can trace its origins back to 1759 and the birth of the Industrial Revolution in Britain.

Split into three key divisions – GKN Aerospace, GKN Driveline and GKN Powder Metallurgy – the multinational designs, manufactures and services systems and components for most of the world’s leading aircraft, vehicle and machinery makers.

In 2017 it recorded pre-tax profits of £572m.

Photograph: David Davies/PA

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Melrose has repeatedly accused GKN bosses of mismanaging the company, while opponents to Melrose have branded the firm an asset-stripper that would carve up the business and prioritise short-term profits over long-term success.

It is the largest hostile takeover launched in the UK for almost a decade, since Kraft swooped on Cadbury in 2009, and has attracted public scrutiny from politicians and unions, as well as investors. Earlier this month, GKN’s largest customer, Airbus, said it would take its business elsewhere if the Melrose deal went ahead.

Quick guide

GKN through the years

1759-1840s

GKN began as the Dowlais Ironworks Co in south Wales in 1759. By the mid-19th century it had become the largest ironworks in the world, producing almost 90,000 tonnes of iron a year.

1900

A reverse takeover pushed through by entrepreneur Arthur Keen created Guest, Keen & Co. Two years later, Keen drove through the takeover of a reluctant Nettlefolds Ltd and the enlarged company became Guest, Keen & Nettlefolds. It was the largest iron, steel and coal group in the country.

1914-45

During the first half of the 20th century GKN became heavily involved in wartime production, while also making its first move into the emerging motor industry. It produced Spitfires, a specialised tank for the D-day landings and millions of steel helmets.

GKN emerged from the second world war as Britain’s biggest steel producer but was virtually bankrupt.

1960s-70s

Faced with the Labour government’s drive to nationalise the steel industry, GKN gradually withdrew from steel over the next 20 years. It pushed into the automotive industry.

1980s

The group made the first loss in its history; it soon expanded globally. In 1988 it acquired a stake in Westland, the British helicopter and aerospace manufacturer, and moved into aerospace technology.

2001

GKN focused on four businesses: aerospace, Driveline, powder metallurgy and land systems. It was relegated from the FTSE 100 index.

2017

GKN issued a series of profit warnings after writedowns at its North American aerospace division and its chief executive designate Kevin Cummings was ousted.

12 January 2018

Melrose made a hostile £7bn cash-and-shares takeover bid, upped to £8bn in March. Non-executive director Anne Stevens, a former Ford executive, became GKN’s new CEO.

March 2018

GKN struck a $6.1bn (£4.4bn) deal on 9 March to merge its automotive business with the US firm Dana in an attempt to fend off the Melrose bid.

Shareholders have to decide whether to accept or reject the bid by 1pm on 29 March. Melrose needs 50% plus one share support.

Photograph: David Davies/PA

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Melrose first expressed interest in buying GKN in January. Subsequently GKN’s management revealed plans to merge its automotive business with the US firm Dana, in an attempt to fend off the hostile approach.

More details soon …