First, a correction about some things I said earlier about the procedure for traditional takeover offers like this one: some of the things I said applied when such an offer goes "fully unconditional" actually apply when it goes "unconditional as to acceptances" - it makes a difference if the offer's acceptance condition is satisfied before some other conditions are (e.g. conditions about getting clearance from competition regulators). The corrected information appears in the reply below.
If the offer goes "fully unconditional" without first going "unconditional as to acceptances", as it will in the common event that the acceptance condition is the last one to be satisfied, then what I said before is correct. I.e. unsurprisingly "fully unconditional" implies "unconditional as to acceptances", and of course unconditional as to all the other conditions as well.
Riftvalley wrote:One part I cannot get my head around is: If I do nothing (i.e reject the offer) and the take-over offer is then successsful then will I (within the time limit) be able to sell my shares at the offer price i.e the Melrose Shares plus cash offer?
You'll be able to sell them on the market for as long as they remain listed, for whatever the market offers. There is no guarantee that will be the offer price, and once the offer has gone unconditional as to acceptances, it's highly likely to be just below the offer price - effectively, no-one else will want to offer as much as the full offer price because they'll want to make at least a bit of profit in the very likely event (after the offer has gone unconditional as to acceptances) that they end up just having to accept Melrose's offer.
Once the offer has gone unconditional as to acceptances, you'll also be able to sell to Melrose for the full offer price by accepting the offer, for as long as the offer remains open. The Takeover Code requires the offer to be extended (and thus remain open) until at least 14 days after it goes unconditional as to acceptances (specifically, it's Rule 31.4 of the >400-page Code, if anyone wants to check it out for themselves!). In practice, I've found that offerors usually extend it longer than that, up to and including "until further notice" (they can't give that further notice before at least 14 days have elapsed without breaking the Code, of course!).
So provided the offer actually turns out to be successful (it won't be if the acceptance condition is never satisfied), you can wait until it goes unconditional as to acceptances without risking being able to sell for the full offer price - but you should then accept the offer reasonably promptly, because that guarantee might expire 14 days later.
Riftvalley wrote:The offer (1.49 Melrose shares and payment of 81 pence in cash) states that if the offer becomes unconditional i.e Melrose has
75% or more of the voting rights of GKN, it is intended that an application will be made to the London Stock Exchange for the cancellation of the trading of GKN Shares on its main market for listed securities and the UKLA will be requested to cancel the listing of GKN Shares on the Official List. What happens to existing shares, will Melrose buy these at the offer price?
Neither application will have an immediate effect - there's a period of a few weeks before trading will be cancelled and the shares delisted. IIRC that period is 20 days - I think trading days, but it could be calendar days. So they'll still be sellable on the market for a while if you really want to, but as indicated above, you should do better accepting the offer at that stage.
Also, the "if the offer becomes unconditional" in that does refer to the offer going fully unconditional, not just unconditional as to acceptances. That's because if the offer has gone unconditional as to acceptances but still has other remaining conditions, the offer won't yet have come into effect, so Melrose won't yet own the shares and won't be able to vote them. To delist the company, they need a shareholder resolution - and it needs to be a special resolution, requiring a 75% vote in favour to pass - which they'll easily be able to get once the offer has gone fully unconditional and they actually own the shares, given the 75%+ acceptance condition, but not before then.
Riftvalley wrote:Does unconditional mean that Melrose must offer to purchase all GKN shares, at the offer price.
Pedantically speaking, no - but that's only because Melrose
have already made such an offer (*), when they made the takeover offer in the first place. What it does mean is that the legally-binding contract formed between you and Melrose if and when you accept the offer now has no conditions remaining that could prevent it coming into effect, i.e. that Melrose is legally obliged to buy your shares from you for the full offer price, with no conditions remaining that could legitimately release them from that obligation (and equally, you are similarly legally obliged to sell your shares to Melrose for that price).
(*) Apart from the fact that strictly speaking, the offer is for all GKN shares that Melrose doesn't own already, rather than absolutely
all GKN shares. And if GKN holds any shares in Treasury (I haven't checked), it's probably not for them either: that's in keeping with the general principle that shares in Treasury exist technically, but for almost all practical purposes, they might as well not exist - they're effectively 'ghost' shares rather than real ones, whose only function is to ease some aspects of complying with company law for the company.
Riftvalley wrote:i am worried about the section in the Melrose offer:
As soon as possible after the cancellation of the trading of GKN Shares on the London Stock Exchange’s main
market for listed securities and the cancellation of the listing of GKN Shares on the Official List, it is intended
that GKN will be re-registered as a private limited company.
Following the Effective Date, Melrose intends to procure the termination of the existing GKN American
Depositary Receipt programme in accordance with its terms.
Delisting of the GKN Shares and the re-registration of GKN as a private limited company will
significantly reduce the liquidity and marketability of any GKN Shares in respect of which the Offer has
not been accepted at that time. Any remaining GKN Shareholders would become minority shareholders
in a majority controlled private limited company and may therefore be unable to sell their GKN Shares.
There can be no certainty that GKN would pay any further dividends or other distributions or that such
minority GKN Shareholders would again be offered an opportunity to sell their GKN Shares on terms
which are equivalent to or no less advantageous than those under the Offer.
That's basically fair warning about the possible consequences of hanging on to the shares for too long - if you do so, it is indeed possible to end up as a minority shareholder in a majority-controlled private limited company, with no sensible option to sell your GKN shares and not receiving any dividend or other distributions from them. They're not the most likely consequences by any means - those are that Melrose end up getting enough acceptances to be able to compulsorily purchase all the remaining shares for the offer price (*), and do so, resulting in you getting the offer price a few months later than if you'd accepted - but they're certainly possible.
But hanging on until the offer becomes unconditional as to acceptances (or fully unconditional if the acceptance condition is the last one to be satisfied is safe) quite simply won't be hanging on to them too long, at least as far as accepting the offer is concerned (if the market offers a higher price than the takeover price and it becomes a question of whether to hang on or sell, that's another matter, which I won't attempt to discuss in this post). That's because if the offer never becomes unconditional as to acceptances, it won't go through and so it won't make any difference whether you accept or not, and if it does, you'll definitely get at least another two weeks to accept. (There is a third possibility, namely that it will go unconditional as to acceptances if you accept and not if you don't. But that's vanishingly unlikely in the typical HYP circumstances of a very largecap company and a typical individual investor, or indeed anything vaguely close to them. It
is a real possibility for large investors to consider, bring the question of whether they
want the takeover to go through into the answer...)
(*) They need acceptances from the owners of 90% or more of the shares that the offer was for (see the footnote to the last section of this reply) and to go through a legal procedure to compulsorily purchase the rest, so a significantly higher threshold than the acceptance condition. But equally, the prospect of becoming a minority-shareholder in a majority-controlled, unlisted, non-dividend paying company is a very unattractive one, so most shareholders who haven't accepted before will accept once the offeror gets to the 75% control level. Usually, that easily takes the offeror up to the point that they can compulsorily purchase the remainder. And from the offeror's point of view, it's generally better to keep the offer open until quite late in the process - each acceptance gained means fewer costs sending shareholders the required legal notices and less chance of a still-active shareholder raising legal objections to the process. Ideally, they want to use compulsory purchase only for those shareholders who really aren't paying attention at all - which can happen (and probably will for a few shareholders in a large shareholder base) for reasons such as someone having died or lost mental capacity, and nobody yet having established that they have the authority to deal with their estate / financial affairs.
Gengulphus