Melrose Industries Share Discussion Threads

[bouleversee] 11/4/2018 16:30

P.S. There's no guarantee that I'd get all shares either, if it's considered to be such a good deal! Where's that monkey with the pin?

Brexitplus -

So if you didn't already have Melrose and did have a sizeable chunk of GKN, what do you think you would be doing now?

[minerve] 11/4/2018 16:28

Make life simple and sell your GKN. Move on. Better value elsewhere.

[bouleversee] 11/4/2018 16:27

meanwhile -

Of course, there is no guarantee that one would get all cash if one requested that option and I think I'd rather have all shares than the basic (cash and shares) offer.

[minerve] 11/4/2018 16:25

pari passu

[brexitplus] 11/4/2018 16:15

Boule..

Yes, pari passau, and profits from Nortek diluted. But I think Melrose can see big profits from GKN.

My belief is that sharing the profits from Nortek with GKN holders was an essential part of the plan, because the GKN holders are effectively getting much more than 1.69x + 81p which made the deal very viable and more likely to succeed.

An all cash offer based on a rights offer would have required a higher price to be paid, as outlined by Christopher Miller to the Parliamentary Committee. In my view it was never a starter.

In addition, previous deals had an agreed price. This wasn’t the case in this hostile bid. Melrose like to have all Finance in place. With this deal the final price was uncertain, particularly if another bidder turned up. So the more complex structure where the multiple of Melrose shares offered could easily be altered was always the most effective approach.

Also, by being totally focussed and making a final offer, with no competition, in my view Melrose got GKN at a good discount. You only have to look at all the things Melrose are doing at Nortek (not just bottom line, as observed by Yertiz) to see that GKN has the potential to be a much, much better company under Melrose ownership.

Others may disagree.

[meanwhile] 11/4/2018 16:13

bouleversee.

The MRO board want to run a big outfit. MRO holders may get something out of it if the GKN improvement is better than expected.
All shares will rank equal.
I would take the cash.

[bouleversee] 11/4/2018 15:59

And if Meanwhile is right, would GKN holders be better off taking as much cash as they can get?

[bouleversee] 11/4/2018 15:55

A bit late in asking this but do the new Melrose shares rank pari passu with existing Melrose shares. I had presumed they would but does that dilute value of existing holdings?

[bouleversee] 11/4/2018 15:52

MEANWHILE: I can't get my brain round that. Why would the Melrose directors do it if only GKN shareholders benefitted? All that aggro must surely be to put a load of dosh in their pockets and existing Melrose holders as well or why take the risk?

[meanwhile] 11/4/2018 15:23

bouleversee,

Previous Melrose acquisitions, Nortek, Elster etc. were made by paying cash, raised via rights issues of shares to existing MRO shareholders.

The market, trusting that Melrose would increase the value of the acquired company considerably, marked up the issued new shares to reflect the likely gain. For example, new MRO shares issued at 95p to buy Nortek were immediately on the market at 150p+, I forget the exact gain but MRO holders got it. Those shares are now 210p.

In this case of GKN, the new MRO shares are issued to GKN shareholders and they are getting the likely gain from improvement in GKN performance. So I am not as enthusiastic with this GKN purchase because the market's perceived gain has already gone to GKN holders.

[bouleversee] 11/4/2018 15:13

Thanks, Brexitplus.

[brexitplus] 11/4/2018 14:16

Definitely holding and possibly increasing.

Until 19th April there will be arbitraging so share fluctuation.

[bouleversee] 11/4/2018 13:06

I didn't spot this board/thread when I posted on the other one earlier today about the various options GKN shareholders have; for me this is the last day I can do so.
Yertiz has kindly steered me over here.

I haven't time to go too far back but I was interested to read the reference to shorting which would explain the drop in Melrose's share price. So is it the same hedge funds which engineered the 50% plus acceptance who are now shorting Melrose and if so isn't that just manipulating the share price for their own short term gains without any reference to the intrinsic value of Melrose, though it would be hard to put an accurate figure on that I assume. If that is the case, I can disregard the current Melrose share price (which had gone up a bit when I looked earlier anyway) and make my decision on what I think the chances are of Melrose turning round such a big fish or finding they have bitten off rather more than they can chew. The trouble is that this little old lady, recently widowed, doesn't feel competent to assess that and I suppose only time will tell.

From what I have read in The Times, Sunday Times and FT, Melrose has done a good job with turnarounds up to now and obviously some holders have done well with them in the past. What I would like to know is whether those holders are still as enthusiastic or whether any doubts have crept in as regards this particular challenge for Melrose. I am vacillating between opting for max Melrose shares and doing a bit of hedging myself with the basic cash + shares offer and am running out of time.

[bouleversee] 11/4/2018 12:48

Thanks, Yertiz. I have just come across the other board which I didn't see earlier. I was interested to read about the extensive shorting which is doubtless the main reason for the drop in share price All too complicated for this little, old lady. I'm going to ask a question about that on the other board.

[yertiz] 11/4/2018 12:38

Bouleversee -there's a more active Melrose BB apart from this one which you might care to look at? Getting definitive information from contributors on these boards probably isn't to be recommended, we all have our own opinions and ideals (some more so than others!!), but my take on it all is that this precise moment in time is the dust is settling, occasionally kicked up again by the Unions, Cable et al, but once we are able to see clearly, Melrose is no bad place to be invested in.

Took a look back at some of the comments on this board to rekindle recent memories, an interesting exercise!

[losos] 11/4/2018 12:31

yertiz - thanks for the 'daily Update' haha sounds like you are going to be busy. I have also been watching Hill & Smith for some time, I like to keep my portfolio around 25, currently 26, so no room, however it's about time I did bit of 'pruning' so we'll see.

[yertiz] 11/4/2018 12:25

So anyone care to speculate on the value of Nortek/Ergotron following Melrose's intervention?

Bought for £2.2 in late 2016, Ergotron alone has been valued at between £800 million to £1 billion fairly recently. Nortek, aside from Ergotron, has to be valued about £3.6 - 3.8 billion - some return!

This is a case in point where MRO has improved the business all round - not just the bottom line - and very quickly too. Now equate that to GKN and I see £££; signs everywhere!

[meanwhile] 11/4/2018 11:55

Hello Yertiz,

I think they improve the financials before selling on to get a better price.

[brexitplus] 11/4/2018 11:34

Yertiz, the new annual report shows the extent that Melrose improve. The media often comments that they are surprised that private equity outfits don’t adopt the Melrose model.

[yertiz] 11/4/2018 11:32

One very obvious omission from the above description and the way Melrose operate is that they 'Improve' companies or portions of the business before they are moved on. This to my mind differentiates Melrose from the Hansons (real asset strippers) of old because of their investment, management and reconditioning they incorporate to the business divisions to ensure they are viable, efficient and obviously sellable.

'Tis all semantics after all, but tarring Melrose with the asset stripping brush is doing them a disservice and sets the wrong precedence, methinks.

[brexitplus] 11/4/2018 11:32

Yertiz

I’m quite keen on Syncona. A bit of a punt but it is a very professional outfit.

Raining hard in Bristol.

[meanwhile] 11/4/2018 10:38

During the contest for GKN, there were a number of accusations directed at Melrose from pro-GKN people which referred to them as 'Asset Strippers'. Examples are the GKN Board, The Daily Mail, UNITE Union, various MPs (Vince Cable), various others (Heseltine).
I've been looking at current views of what comprises 'Asset Stripping', starting with 3 sources of internet definitions.

Investopedia
"Asset stripping is the process of buying an undervalued company with the intent of selling off its assets to generate a profit for shareholders."
Market Business News
"Asset stripping refers to buying a company and then selling it in bits. Asset strippers acquire businesses whose collective net worth are less than the value of their individual assets. They then sell off the acquired companies’ assets separately."
Oxford English Dictionary
"The practice of taking over a company in financial difficulties and selling each of its assets separately at a profit without regard for the company's future."
These 3 are fairly consistent in the process carried out but differ somewhat in referring to motives, intentions and disregards.

There's no doubt in my mind that, under these definitions, Melrose have performed a good deal of Asset Stripping since 2003, I think particularly with FKI and now with Nortek. GKN looks a good candidate also. Melrose's argument, of course, is that both FKI & Nortek needed to be drastically restructured to save them and this also makes sense to me. So maybe Asset Stripping was required with these 2 companies. With GKN this is less obvious a need.

We will all have our own views on this subject, but being honest, I believe I've made my profits on Melrose largely from the practice of Asset Stripping.

[yertiz] 11/4/2018 10:32

At the risk of being perceived as negative - really this is only constructive criticism, you've not added your daily tips, B+. Lol.

Good result in Scalextric (always miscalled scaletrix when I were a nipper!).

[bouleversee] 11/4/2018 10:30

As a GKN holder, I have to say I have been disappointed in their management of late. I know little of Melrose but my newspapers have been anti GKN and pro Melrose so I was minded to opt for the more Melrose shares option, not knowing what else I should do with the cash otherwise as there seem to be question marks over most shares at present.. However, I see the Melrose share price has come down and at last night's closing prices the cash option would have been worth more and the all share option the least valuable. All changed a bit today as Melrose is up 0.99% and I see Goldman Sachs has increased its holding to 8.3%. I am not a trader; I want to buy and hold for the long term (even though I may not have one) so have you long term Melrose holders been satisfied with your investment to date and do you have any worries that with GKN they may have bitten off more than they can chew. I am trying to get my brain round why their price is lower now than at the time of the bid, unless it is just that GKN have wasted so much of shareholders' money on fees in their desperate attempt to avoid the inevitable so Melrose will have more to make up.

[brexitplus] 11/4/2018 10:13

Yertiz

Very comprehensive.

Weather miserable. Off to Bristol to see aged relative. All day breakfast at local cafe. I came second in the Scalextric, my best place ever. Minis are terrible but Porsches brilliant.

GS and BoA likewise. Still lots of trading by arbitrageurs - money to be made.

Have read the Melrose Annual Report. Doing masses at Nortek. Very professional and productive.

Await negative postings.