GKN and its would-be buyer, the turnaround specialist Melrose, are lobbying the engineering firm’s shareholders as the battle for control hots up.
The news helped push GKN’s shares up more than 4% to 437.4p, compared with the current value of the Melrose offer of about 424p a share – or more than £7bn. This suggests the City expects either a higher offer from Melrose, or perhaps a rival bidder.
On Friday GKN’s shares surged 25% as it rejected the proposed offer from Melrose, saying it undervalued the company, and put forward its own plans to split into separate aerospace and automotive businesses.
GKN has been vulnerable since November, when it issued a shock profit warning following problems at its US aerospace business. That led to the departure of the proposed chief executive Keith Cummings, who had run the underperforming unit, before he had taken up the post.
Anne Stevens, who was announced as GKN’s new chief executive on Friday, is meeting investors to persuade them that the current management team is best placed to turn the business around.
However, Melrose is telling GKN investors that the firm is undermanaged and lacks focus. The Melrose chief executive, Simon Peckham, said: “GKN shareholders can elect to sell in the market right now for a substantial premium to Friday’s opening price … Or they can choose to combine their business with ours and have the majority share in what we are confident will be a business capable of significant value enhancement.”
The meetings are expected to continue over the next two weeks, with Melrose likely to unveil its formal offer after that.
The analyst Andrew Gollan at Berenberg said a raised offer of 455p would be hard to reject: “We expect Melrose to return with a higher offer for GKN and for it to be accepted. There is an air of inevitability that GKN will end up being owned by Melrose. ”
Rival bidders such as private equity firms may yet gatecrash the bid, with Carlyle mentioned as a possible candidate.
The activist investor Elliott has taken a stake in GKN and a short position in Melrose.
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