GKN Share Discussion Threads

[meanwhile] 17/1/2018 14:00

I’ll be following Sir Dr Vince Cable’s lead.
Has he said any more?

[bonio10000] 17/1/2018 10:58

Would be great for GKN to remain in British hands and to be run by people who know what they are doing.

[broadwood] 17/1/2018 10:46

GKN responds.

[broadwood] 17/1/2018 10:45

Turnaround specialist Melrose has stepped up its fight to acquire FTSE 100 engineering giant GKN with a hostile takeover bid worth around £8.5bn, including debt.

Melrose hopes to tempt GKN’s shareholders with the prospect of an immediate cash payout worth 81p per share and 57pc ownership of the combined company after its board rejected a takeover approach last week.

The terms of the offer are the same as those GKN rebuffed, but now represent a 29pc premium on the closing of its shares the day before the initial approach was disclosed. It values GKN at 430.1p per share, or £7.4bn, and Melrose will also have to take on GKN's debt of around £1bn.
Simon Peckham, Melrose’s chief executive said: "Since our approach was announced, the Melrose share price has risen as the market digests the attractive opportunity our proposal represents."

He added: “However, the real value uplift will come from merging the interests of the two sets of shareholders and creating a business valued at approximately £11 billion today, of which GKN holders will own the majority, including Nortek, our US business which is trading strongly.”
Melrose believes it can “re-energise and re-purpose” GKN's operations to boost its margins after the engineering firm issued two profit warnings towards the end of last year.

The approach forced GKN to reveal its own turnaround plans last week, including the separation of its automotive and aerospace arms and the appointment of interim boss Anne Stevens as permanent chief executive

[minerve] 16/1/2018 14:11

Melrose plans:

[dvb99] 15/1/2018 10:48

I am not alone in my viewpoint. Vince Cable agrees and so do many experienced commentators. You will have to work harder if I am to 'buy' the argument and advice of a nobody on ADVFN.

While I agree with Vince cable's comments, to an extent, yes we do need engineering companies such as GKN. We also need engineering companies that can perform well, and certainly over the last few years GKN's board have "under performed" - if nothing else this may give the GNK board the kick up the backside it needs!

Also, in defence of Melrose, they appear to know what they are doing, and are very good at it - do not lump them with private equity outfits, who use cheap borrowing to finance acquisitions, load them up with debt then sell them on with a bit of "financial engineering".

[leadersoffice] 15/1/2018 06:34

Carlyle thinking of throwing its hat into the ring for GKN

[withyone] 14/1/2018 19:03

As in most takeovers, the fate of GKN is in the hands of the large institutional shareholders. PIs will have little influence. The BOD will be very lucky to have the time to put their plans into action. A quick profit and on to the next opportunity. I hope it does not end up in chinese hands.
Note.. I hold shares in both GKN and Melrose

[grahamburn] 14/1/2018 17:41

Minerve

You seem to have missed the thrust of both mine and Meanwhile's posts, but, for all your undoubted experience, it's pointless to go on about the putative deal as we'll just go round in circles. However, three points.

1) Vince Cable has, in fact, been put down very strongly by most serious commentators in the financial press. OK, the BBC has provided him with a platform, but he clearly doesn't understand the difference between the old-style asset stripper and the Melrose mantra of re-organising and building a thriving business over 2 to 5 years (or possibly more) before selling on so that ALL stakeholders thrive.

2) Melrose do not use "cheap borrowed finance" solely. In fact, their recent acquisition (Nortek - back end of 2016) was financed substantially through a rights issue, as has been the case with most of their previous acquisitions.

3) You haven't taken on board the key point in my last post. The Melrose proposal is structured to give GKN shareholders a continuing and substantial stake in the existing business (which hopefully can be grown into a better business not just for shareholders but ALL stakeholders) as well as Melrose's existing turnround businesses. Indeed, GKN shareholders will have a larger share of the combined business than existing Melrose shareholders.

[minerve] 14/1/2018 16:05

MEANWHILE

"If I do, my advice to you is simple : stop reading 'The Textbook of life', which I imagine is a thick book in at least 2 volumes, telling (theoretically) how the world ➡️ should be ⬅️, but never is. Things rarely work according to a theoretical model."

So you obviously agree things could be better. I don't need your advice thank you. I am a qualified engineer who has been a director at a listed engineering company. What are your qualifications and where is your credibility 'base' on these issues?

"It matters little, to use your own words, whether 'a board of directors act in the interests of the company' or 'a board of directors act in the interests of themselves'. What matters is the end result of their efforts. We've seen the GKN board performing at GKN. We've seen Melrose board performing at Melrose. That's where the 'huge difference' is."

Performance is different to every observer and different to each stakeholder. As I have said before, if you just view a company from a shareholder's short-term perspective, someone like Melrose is wonderful. However, if you have a long-term perspective and are more open to being less selfish and allow acceptance that other stakeholders do exist and have their own expectations and needs, then Melrose is not so attractive.

I would like to see Melrose and all these self-serving companies continue to prosper in a world where money isn't so cheap - they wouldn't know where to start! Cheap finance is their ONLY weapon and USP - some intellect that! Dear me.

I am not alone in my viewpoint. Vince Cable agrees and so do many experienced commentators. You will have to work harder if I am to 'buy' the argument and advice of a nobody on ADVFN.

[meanwhile] 14/1/2018 15:15

Minerve,

I think I follow your argument but it took several readings of your post.

If I do, my advice to you is simple : stop reading 'The Textbook of life', which I imagine is a thick book in at least 2 volumes, telling (theoretically) how the world should be, but never is. Things rarely work according to a theoretical model.

It matters little, to use your own words, whether 'a board of directors act in the interests of the company' or 'a board of directors act in the interests of themselves'. What matters is the end result of their efforts. We've seen the GKN board performing at GKN. We've seen Melrose board performing at Melrose. That's where the 'huge difference' is.

[minerve] 14/1/2018 10:58

MEANWHILE

Yes, employees, customers, suppliers etc.. etc..

Yes, employees have to ride turbulent times all the time. Companies obviously go through aquisitions, disposals, transfers etc.. What you have to ask yourself is: is the activity increasing long-term shareholder value for acceptable risk for the benefit 'of the company' or is it something else? There is a huge difference between a board of directors acting in the interests of the company and a board of directors acting in the interests of themselves. We have to make that decision and either vote with our feet and sell the share or not vote for the director(s) at re-election.

[meanwhile] 13/1/2018 23:35

Minerve,

I am wondering what 'other stakeholders' you think should be considered? Personnel, workforce Yes, I agree.
Customers, maybe; suppliers, maybe; people with a sentimental attachment to the old Guest, Keen & Nettlefolds, no.

If we therefore believe the workforce to be the main group of 'other stakeholders', we should consider what sort of a ride they've had under the rather turbulent recent fortunes of the group, the many acquisitions, disposals & transfers of production the group has made in the last 2 decades.

[minerve] 13/1/2018 22:04

grahamburn

Thanks for your respectful post.

You are right in that I don't know Melrose that well. To be frank, I don't have much respect for the modus operandi of "BUY, IMPROVE, SELL". There is no real intellectual property or shareholder value created other than that acquired using the availability of extremely cheap finance. There is nothing clever in this and it is just a case of opportunity and contacts. I don't think society should allow anyone to acquire ('overnight') the stewardship and ownership of such shareholder value - that has taken sometimes many decades to build - and then have absolute discretion as to what they decide to do with it, sometimes against other stakeholders who have run the course.

You don't get something for nothing and improvements for shareholders will most likely, certainly (I believe) under Melrose, come at the expense of sacrifice by other stakeholders. It is simply impossible for society to be amicable if we go about without reasonable regard for others. Once we have made our money in the stockmarket we still have to share the pubs and clubs of those who have been wrongfully treated in order for us to make that extra gain.

[meanwhile] 13/1/2018 21:55

The argument goes on.
My simple view is that all organisations benefit from a good shakeup periodically and GKN seem overdue for this. Who better to do it than a british company with a great record of reviving tired old businesses.

[minerve] 13/1/2018 21:31

Cisk

Again you talk about shareholder value alone!

How many times do I have to say that a company has other stakeholders in addition to shareholders! If you just consider your position as a shareholder and ignore other stakeholders then that has to be a selfish view! It is nothing personal, just an observation.

If you want us to not act like children in a playground I would suggest you don't make comments like "Personally I don’t care." because that is just a baby throwing the toys out of the pram. It is not a reasonable, respectful and educated answer backed up by any rationale!

Thanks

[grahamburn] 13/1/2018 18:57

Minerve

I have, on other boards, respected your comments and admired your grasp of facts. However, for once, it would appear you haven't adequately researched Melrose and its modus operandi of "BUY, IMPROVE, SELL", as illustrated by your casual reference to an "airconditioning firm it bought".

Melrose does not just deal in financial metrics (as conglomerates did in the past), but rather re-organises (culling only where appropriate), whilst investing heavily in parts of a business with genuine potential to build a better business for ALL stakeholders before moving on to its next project.

Far from being a manufacturing paragon, GKN has been limping along for far too long — an issue driven home by November’s botched succession plan and profits warning. Meantime, Melrose’s “buy, improve, sell” model has delivered billions of pounds of value over 15 years — hard to pull off, whatever the economic backdrop, without improving the businesses it buys.

Melrose started life in 2003 with a minnow value of £13m. Where is it now? Melrose is currently valued at £4.4 billion. But it would be bigger than GKN if you added another £4.4 billion it’s returned to investors after turning round the likes of FKI and Elster.

The suddenly-appointed new CEO at GKN, Ann Stevens, may have her “Project Boost” plan to lift GKN’s below-target margins. But as recently as January 3, GKN was confirming she was only a stand-in chief executive: a role forced on her in November by the ousting of the man supposed to succeed ex-boss Nigel Stein: aerospace head Kevin Cummings, fired before he even took the job. Yes, Ms Stevens spent 16 years at Ford. But that ended in 2006 — and she hasn’t run anything for four years. Indeed, she wouldn’t now be permanent chief executive if it wasn’t for Melrose’s approach.

Which team would you sooner back, especially as the putative deal offered by Melrose would give GKN shareholders 57% of the enlarged total business? In short, you will have a substantial stake in a larger business which has a record of margin improvement, a City fan club and debt lined up from Royal Bank of Canada and Lloyds for a formal bid. It also looks smarter to improve GKN’s businesses before breaking them up. If Melrose bumps the price, GKN will need a lot more than Sir Vince to win this fight.

Again, I stress, I have significant holdings in BOTH GKN and MELROSE so can, I hope, take a broader view.

NB Some of the above comments (ie facts and figures) are taken in part, for convenience, from the Business Commentary section of The Times Business News.

[minerve] 13/1/2018 18:08

Cisk

You have NO IDEA whether they could have been managed better or not! You are ONLY gauging them on what others say and from the perspective of a shareholder. I would like to remind you that, believe it or not, there are other stakeholders in the business apart from YOU. You are showing your ignorance and selfishness again!

Melrose may deliver better financial figures than their peers but I can assure you it is ONLY at the expense of something else. They don't have a monopoly on knowledge or intellect. The only difference that Melrose offer is to give other stakeholders less priority in the business. GKN are NOT in the same space. I can assure you that if one is not too careful a biased focus on financial objectives eventually, long term, may lead to operational difficulties. Some shareholders don't know themselves what is good for them!

I hear Melrose are still sacking employees from the airconditioning firm it bought?

Airconditioning? A bit different from where GKN are at! LOL

[meanwhile] 13/1/2018 17:06

Now we have Vince Cable offering his advice, on twitter I'm told. This is the man who claims to have predicted the 2008 banking crisis, except he can't prove it because he didn't write it down. He looks a miserable old fool and such is now found to be the case.
He urges the government to oppose the takeover of GKN by the 'asset stripper Melrose'. He clearly hasn't done his research here or he would know that Melrose invests in its businesses and rejuvenates them.

[cisk] 13/1/2018 16:34

Minerve, It’s very easy to make broad-brush assumptions about investors - call them selfish or short term or whatever you like. You might be right or wrong. Personally I don’t care.

I am not a trader. I am an investor. I have owned shares in GKN for nearly 10 years. In that time they’ve gone up and down. I bought them because I believe in the business and support UK engineering. Could they have been managed better? Of course.

I’ve also owned shares in Melrose for a similar period. If you look at their track record I would not call it BS.

You should understand that they are in business to make money. If GKN don’t, they will go bust and people will loose their jobs. I agree they are not struggling at the moment, but they need to do better otherwise some foreign company will buy them and will certainly make a whole lot of people redundant. And better it be Melrose and keep it British and actually invest in the business - which Melrose do by the way.

This is not 70s Britain where once great engineering companies like rolls nearly go bust and have to be bailed out by the government. And then to continue making strategic errors 40 years later like selling off their competency in the narrow body market, the area that’s growing the strongest!

This is a time of growth in the aerospace business, margins should be high and GKN should be making hay while this sun is shining. The fact that they are not speaks volumes. And if it takes Melrose to improve things and invest in the business, then so be it.