GKN takeover offer from Melrose

[Gengulphus]

Aren't the GKN directors only recommending acceptance if/when it becomes wholly unconditional, rather than now, however, ...

Quite right - apologies, my comment "(GKN directors say they still think the offer undervalues GKN but they now recommend accepting)" was over-summarised.

Gengulphus

[Alaric]

Quite right - apologies, my comment "(GKN directors say they still think the offer undervalues GKN but they now recommend accepting)" was over-summarised.
Gengulphus

If you want to do "mix and match", doesn't this set an implied deadline for acceptance?

[Bouleversee]

My understanding is that one will have exactly the same choices with the same chance of getting them -there is no guarantee - if one accepts within the time set at the point of being declared wholly unconditional.

[Dod101]

Melrose have won, see https://www.theguardian.com/business/20 ... e-takeover

52.43% of shareholders accepted.

No, as TJH says, 52.43% of shareholders have accepted the offer. There hasn't been a vote, there almost certainly won't be a vote, and if there had been a vote (which there would have been if the takeover had been attempted by a scheme of arrangement rather than a traditional takeover offer), a 52.43% majority of shareholders who voted would have fallen well short of the 75% required to pass a special resolution! (Whether 52.43% of all shareholders, i.e. both those who voted and those who didn't, would have been enough would have depended on the split of the remaining 47.57% between those voting against and those not voting - but that's moot, because there's no vote involved.)

In this case, 52.43% of the entire shareholder base has apparently voted to accept the offer. That is a majority of all the shareholders and as such Melrose is entitled to claim victory. What else do you call an offer which you can accept or not other than a vote?

Had this been carried out by a scheme of arrangement, all that would have been required would have been 75% of those who bothered to vote to vote in favour and that could easily have been 75% of say 40% or even 75% of 52.43% and the takeover would have passed muster even although in these cases, only 30% of the total shareholder base might have voted in favour or in the second case, 39.3% might have voted in favour.

Given the general inertia in such matters, a Scheme of Arrangement is generally accepted as a much less demanding test than a straight majority vote which is what this exercise has been.

Dod

[Gengulphus]

If you want to do "mix and match", doesn't this set an implied deadline for acceptance?

My understanding is that one will have exactly the same choices with the same chance of getting them -there is no guarantee - if one accepts within the time set at the point of being declared wholly unconditional.

Sorry, I think your understanding is probably wrong. As stated in Melrose's RNS and pointed out in my last long post in this thread (#128889 above), there's now an explicitly-stated deadline of April 16th for using the Mix & Match options, and becoming wholly unconditional is only expected "no later than 19 April 2018". That doesn't rule out the possibility that the offer becomes wholly unconditional by April 16th, in which case it will still be possible to use the Mix & Match options when it becomes wholly unconditional. But I suspect that that precise date has been given because whichever regulatory body is involved has indicated that its response will be forthcoming shortly beforehand, maybe April 18th or 19th, and so I suspect that by the time the offer becomes wholly unconditional, the Mix & Match options will no longer be available.

So basically:

* If you want to use the Mix & Match options, there's an explicit deadline of April 16th.

* If you don't want to use the Mix & Match options, there's no explicit deadline yet, and you'll get at least 2 weeks warning if one is set.

I should also point out that all of these deadlines are the company's deadlines, and that they almost certainly refer to when the acceptance is received by the company, not when you do the accepting. What actually matters for shares held in nominee accounts (i.e. most individual shareholders' holdings) is their broker's deadline, which will probably be several days earlier. And even for shares held as certificates, using the Mix & Match options when accepting on April 16th is likely to involve making suitable special arrangements to get the acceptance to the appropriate address by the precise deadline (1pm on April 16th), and probably isn't reliable without special arrangements for a day or two before that.

For shares held in CREST accounts, I don't know the situation - the exact procedures to be followed are doubtless in the offer document, and might or might not involve one's broker following them: if so, the crucial deadline is again the broker deadline. But I'll leave deciphering that from the offer document to those readers who actually need to know - if there are any!

Gengulphus

[Gengulphus]

No, as TJH says, 52.43% of shareholders have accepted the offer. There hasn't been a vote, there almost certainly won't be a vote, and if there had been a vote (which there would have been if the takeover had been attempted by a scheme of arrangement rather than a traditional takeover offer), a 52.43% majority of shareholders who voted would have fallen well short of the 75% required to pass a special resolution! (Whether 52.43% of all shareholders, i.e. both those who voted and those who didn't, would have been enough would have depended on the split of the remaining 47.57% between those voting against and those not voting - but that's moot, because there's no vote involved.)

In this case, 52.43% of the entire shareholder base has apparently voted to accept the offer. That is a majority of all the shareholders and as such Melrose is entitled to claim victory. What else do you call an offer which you can accept or not other than a vote?

An offer.

No need to add "which you can accept or not" - it quite simply isn't an offer if that isn't the case. (The well-known phrase "an offer you can't refuse" is ironic...)

And the stockmarket's job is basically to make offers to buy and sell shares widely available for acceptance by whoever wants to accept them. So if you insist on calling all offers "votes", there are continuous "votes" going on for all listed shares. You are of course free to use the language in that way if you want - but the rest of us are equally free to regard doing so as misusing it.

Gengulphus

[Dod101]

Gengulphus has of course ignored the main point which is that a Scheme of Arrangement is generally regarded as a much less demanding test than needing to get more than 50% of all shareholders to accept an offer, which is all I was saying. I am not going to enter into a fine discussion about whether an offer is a vote or not; that is simply irrelevant. He must know as well as I do that had Melrose tried to take out GKN by means of a Scheme of Arrangement there would have been the most almighty outcry about unfair tactics. At least they set themselves the task of convincing more than 50% of those on the share register to agree to their offer, which they have done.

Dod

[Gengulphus]

Gengulphus has of course ignored the main point which is that a Scheme of Arrangement is generally regarded as a much less demanding test than needing to get more than 50% of all shareholders to accept an offer, which is all I was saying. I am not going to enter into a fine discussion about whether an offer is a vote or not; that is simply irrelevant. He must know as well as I do that had Melrose tried to take out GKN by means of a Scheme of Arrangement there would have been the most almighty outcry about unfair tactics. At least they set themselves the task of convincing more than 50% of those on the share register to agree to their offer, which they have done.

And Dod101 is of course playing the old trick of asking a question, getting an answer to that question that he doesn't like, and then claiming that the question is irrelevant. To be specific, Dod101's question was "What else do you call an offer which you can accept or not other than a vote?", and he asked it in the context of a quote of something I'd said, the main point of which was that the 52.43% is an acceptance level for an offer, not the outcome of a vote (see post #128962 above).

I didn't answer his point about a scheme of arrangement being a much less demanding test because it wasn't relevant to that question and I didn't have anything I wanted to say about whether schemes of arrangement or traditional takeover offers are the more demanding, or about Melrose's reasons for choosing the way they did (*). A simple application of the principle that if one doesn't have anything one wants to add to a particular aspect of a discussion, don't do so. And it really would be easier all around if Dod101 applied the same principle to questions he regards as irrelevant...

(*) For what little it's worth, the only way I could know those reasons as well as Dod101 does is if Dod101 knows absolutely nothing about them!

Gengulphus

[Bouleversee]

Gengulphus said:

"Sorry, I think your understanding is probably wrong. As stated in Melrose's RNS and pointed out in my last long post in this thread (#128889 above), there's now an explicitly-stated deadline of April 16th for using the Mix & Match options, and becoming wholly unconditional is only expected "no later than 19 April 2018". That doesn't rule out the possibility that the offer becomes wholly unconditional by April 16th, in which case it will still be possible to use the Mix & Match options when it becomes wholly unconditional. But I suspect that that precise date has been given because whichever regulatory body is involved has indicated that its response will be forthcoming shortly beforehand, maybe April 18th or 19th, and so I suspect that by the time the offer becomes wholly unconditional, the Mix & Match options will no longer be available."

Looks like you are correct about that, Geng. so why are the GKN Board advising shareholders to accept when the offer becomes wholly unconditional if it would be to their disadvantage to wait that long? I shall do what my brokers tell me to in due course.

[Bouleversee]

Gengulphus has of course ignored the main point which is that a Scheme of Arrangement is generally regarded as a much less demanding test than needing to get more than 50% of all shareholders to accept an offer, which is all I was saying. I am not going to enter into a fine discussion about whether an offer is a vote or not; that is simply irrelevant. He must know as well as I do that had Melrose tried to take out GKN by means of a Scheme of Arrangement there would have been the most almighty outcry about unfair tactics. At least they set themselves the task of convincing more than 50% of those on the share register to agree to their offer, which they have done.

Dod

Can there be a scheme of arrangement if it is a hostile bid? Sounds rather a contradiction in terms.

[Dod101]

Gengulphus has of course ignored the main point which is that a Scheme of Arrangement is generally regarded as a much less demanding test than needing to get more than 50% of all shareholders to accept an offer, which is all I was saying. I am not going to enter into a fine discussion about whether an offer is a vote or not; that is simply irrelevant. He must know as well as I do that had Melrose tried to take out GKN by means of a Scheme of Arrangement there would have been the most almighty outcry about unfair tactics. At least they set themselves the task of convincing more than 50% of those on the share register to agree to their offer, which they have done.

And Dod101 is of course playing the old trick of asking a question, getting an answer to that question that he doesn't like, and then claiming that the question is irrelevant. To be specific, Dod101's question was "What else do you call an offer which you can accept or not other than a vote?", and he asked it in the context of a quote of something I'd said, the main point of which was that the 52.43% is an acceptance level for an offer, not the outcome of a vote (see post #128962 above).

I didn't answer his point about a scheme of arrangement being a much less demanding test because it wasn't relevant to that question and I didn't have anything I wanted to say about whether schemes of arrangement or traditional takeover offers are the more demanding, or about Melrose's reasons for choosing the way they did (*). A simple application of the principle that if one doesn't have anything one wants to add to a particular aspect of a discussion, don't do so. And it really would be easier all around if Dod101 applied the same principle to questions he regards as irrelevant...

(*) For what little it's worth, the only way I could know those reasons as well as Dod101 does is if Dod101 knows absolutely nothing about them!

Gengulphus

I am playing no trick but will leave others to judge. The point is that you were more or less suggesting that a vote via a scheme of arrangement would have been more satisfactory (your 128889) which it certainly would not have been, and 'tis you who are dodging that point, but no matter, I have nothing more to say.

Dod

[Sorcery]

Well, got to say I am disappointed by the vote. I just can't see the attractions of Melrose at all. I voted against the offer.
Can't see how Melrose can afford it, Melrose already has a negative net asset value, pays a crap dividend, has a historically very high PE ratio and has historically provided a crap return to investors.
The only way this can work is if they asset strip fast.

I will be selling soon, will price watch and dispose accordingly.

[Bouleversee]

Well, got to say I am disappointed by the vote. I just can't see the attractions of Melrose at all. I voted against the offer.
Can't see how Melrose can afford it, Melrose already has a negative net asset value, pays a crap dividend, has a historically very high PE ratio and has historically provided a crap return to investors.
The only way this can work is if they asset strip fast.

I will be selling soon, will price watch and dispose accordingly.

What do you mean by "I voted against the offer"? There was no vote. Don't you mean you did nothing. And are you planning to sell before it is all fait accomplis and you get the default option, or sell the Melrose shares you would get at some propitious point after you have received them? You could, of course, opt for more cash.

[Alaric]

What do you mean by "I voted against the offer"? There was no vote. Don't you mean you did nothing.

Most Brokers gave a four way option, namely accept the share and cash mix, ask for shares only, ask for cash only or decline. It's now understood that Brokers lumped the "decline" with "no response".

[Bouleversee]

What do you mean by "I voted against the offer"? There was no vote. Don't you mean you did nothing.

Most Brokers gave a four way option, namely accept the share and cash mix, ask for shares only, ask for cash only or decline. It's now understood that Brokers lumped the "decline" with "no response".

My broker said one didn't have to respond at all if one didn't want to accept the offer; there was only a 3 way option. Same with my children's broker.

[Sorcery]

My broker said one didn't have to respond at all if one didn't want to accept the offer; there was only a 3 way option. Same with my children's broker.

I kind of assumed that by not voting to accept I was voting against the takeover. Not sure why that should be worthy of comment, surely the reasons I gave are more important?

[Bouleversee]

Sorcery:

Indeed. It's just that there is a difference between sitting on the fence and actually voting against something. I didn't respond but my inclination was to accept, though I was waiting to hear the full story which didn't in fact come out till after the deadline for accepting through my broker and, knowing I could jump in at the unconditional stage and that it would be the big holders who decided the day, I didn't want to compromise my ability to sell if something happened to make me think "a plague on both their houses". And the govt. could still put a spoke in, though I doubt they will.

I was in fact very interested in your comments which ran counter to all I had read in my newspapers. I thought they had made good returns of capital to shareholders in the past but I confess I have not had time to scour their history; I also had a dim view of GKN's performance for some years and their handling of the bid. I have a few days to think about it and check on a few facts.

[Gengulphus]

... The point is that you were more or less suggesting that a vote via a scheme of arrangement would have been more satisfactory (your 128889) which it certainly would not have been, ...

Nonsense. That "more or less suggesting ... would have been more satisfactory" was done by your own brain - I said absolutely nothing about one takeover mechanism being more satisfactory than the other. I am only responsible for what I actually say, not for whatever extra meanings readers fantasise are there.

Gengulphus

[Gengulphus]

What do you mean by "I voted against the offer"? There was no vote. Don't you mean you did nothing.

Most Brokers gave a four way option, namely accept the share and cash mix, ask for shares only, ask for cash only or decline. It's now understood that Brokers lumped the "decline" with "no response".

That's not actually a matter of you either accepting the offer or voting on it, but of you giving your broker instructions about how and whether to accept on your behalf. It's got to be done in that somewhat roundabout way because you're not the registered legal owner of your shares (your broker's nominee company is), and companies are for obvious reasons not allowed to take instructions about what to do with shares from anyone other than the shares' registered legal owner or someone duly appointed to act on the legal owner's behalf (e.g. by a Power of Attorney or by the Court of Protection).

And if one looks at Melrose's final offer document and its associated response form (*) to see what the registered legal owner is expected to do, one finds (eventually - it's a long document!) that the offer document contains reasonably prominent details (on page 9) of the procedure to accept the offer, with or without use of the Mix & Match options, but nothing about how to decline it. So basically all your broker can do is say "We're accepting the offer for X shares, of which Y have elected for more shares and Z for more cash under the Mix & Match options" - and that's basically all the choices that can be entered into the response form. The only way the broker's response to the company can deal with a client giving instructions to decline the offer is simply not to include their shares in the number of shares they enter for X - there is no box for "number of shares for which the shareholder wants to reject the offer". And for most brokers (**), that's also the only way it can deal with a client failing to give instructions about the takeover offer at all.

So why do many (not all) brokers offer their clients two ways of doing the same thing? I.e. by offering a four way choice including 'decline' rather than just a three way choice that excludes 'decline'? Good question, and I can only guess - my top two guesses are (a) that it is cheaper to include a 'decline' option that is treated just like failing to choose any option than to deal with lots of clients asking how on earth they decline; and (b) that it allows them to avoid sending deadline reminders to clients who have actually already made their choice.

(*) Melrose's original offer document is also needed to fully understand the final offer document. And I should warn people that they'll probably need to deal with a disclaimer before they can look at either offer document or the response form.

(**) I say "most brokers" because I have known a case of a broker's terms & conditions saying that if the client fails to give instructions about a takeover offer, the broker will accept on their behalf if it's a recommended offer and not accept on their behalf if it's a hostile offer.

Gengulphus

[Sorcery]

Sorcery:

Indeed. It's just that there is a difference between sitting on the fence and actually voting against something. I didn't respond but my inclination was to accept, though I was waiting to hear the full story which didn't in fact come out till after the deadline for accepting through my broker and, knowing I could jump in at the unconditional stage and that it would be the big holders who decided the day, I didn't want to compromise my ability to sell if something happened to make me think "a plague on both their houses". And the govt. could still put a spoke in, though I doubt they will.

I was in fact very interested in your comments which ran counter to all I had read in my newspapers. I thought they had made good returns of capital to shareholders in the past but I confess I have not had time to scour their history; I also had a dim view of GKN's performance for some years and their handling of the bid. I have a few days to think about it and check on a few facts.

Here is a link to the last Melrose financial report https://www.melroseplc.net/media/1039/m ... -final.pdf
Profits don't look that great 2p statutory for the 6 months against a 231p share price. Melrose was an oil services company until recently.
Seems they have managed to get a great reputation for doing deals with no financial evidence I can see.