GKN has an activist investor to contend with as it seeks to rebuff a £7bn (US$9.6bn) unsolicited approach from Melrose. Elliott, a US hedge fund with a track record of intervening in takeovers, said on January 15 that it holds a 1.7% interest in GKN through contracts-for-difference.
UK-listed GKN, which makes parts for the aerospace and auto industries, rejected the approach from turnaround specialist Melrose on January 12 as “entirely opportunistic”and set out plans to split its business in two, improve profitability and appointed Anne Stevens as CEO.
Melrose said it could significantly improve the performance of both GKN’s aerospace and engineering divisions, maximising value for shareholders before any split.
The involvement of Elliott could force GKN to abandon its hard-line stance and come to the negotiating table. Elliott has been increasingly active in Europe, last year lobbying for a break-up of Dutch paint maker Akzo Nobel after it rejected a bid from US rival PPG. In 2016 it successfully forced brewing giant Anheuser -Busch Inbev to raise its offer for SAB Miller.
A person familiar with the situation told Reuters that while Elliott believed the current offer from industrial turnaround specialist Melrose was too low, GKN should open discussions with its suitor.
Independent advisory boutique Gleacher Shacklock is advising GKN along with joint corporate brokers JP Morgan Cazenove and UBS. Rothschild, RBC Capital markets and Investec are working with Melrose.