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GKN takeover offer from Melrose

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Sorcery
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Re: GKN takeover offer from Melrose

#119743

Postby Sorcery » February 22nd, 2018, 6:26 pm

Bouleversee wrote:My online broker has sent me details of the multi-optioned offer from Melrose which I have to decide on by March 5.

I know it's a hostile bid and the GKN Board recommends rejection on the grounds that it is opportunistic (aren't they all?) and seriously undervalues the Company, though the press articles I have read suggest that Melrose would make a better job of transforming GKN than the Company would and they seem to have a good record of turning round companies successfully..


Perhaps I'm a little confused, Company Refs has GKN on a market cap of £7.2 billion, Melrose on a market cap of £4.4 billion.
The only way I can see the takeover working is if Melrose asset strips GKN as soon as they can, can't see Melrose being able to live with an extra £7.2 billion of borrowings + GKN''s own borrowings. Also Melrose are on quite a high future PE compared with GKN.
If I was a shareholder (considering a holding because GKN looks cheap) I would reject the offer. Corbyn may have accidentally got it right in this case.

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Re: GKN takeover offer from Melrose

#119745

Postby Alaric » February 22nd, 2018, 6:39 pm

Sorcery wrote: can't see Melrose being able to live with an extra £7.2 billion of borrowings + GKN''s own borrowings.


It's a mixed share and cash offer. They aren't going to need to borrow the whole of GKN's capitalisation.

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Re: GKN takeover offer from Melrose

#119756

Postby Sorcery » February 22nd, 2018, 7:55 pm

Alaric wrote:
Sorcery wrote: can't see Melrose being able to live with an extra £7.2 billion of borrowings + GKN''s own borrowings.


It's a mixed share and cash offer. They aren't going to need to borrow the whole of GKN's capitalisation.


Thanks for that, I should have looked a little deeper. Ok so https://www.gkn.com/globalassets/downlo ... cument.pdf page 20 states that shareholders are to be returned £1.4 billion plus they are going to take on GKN's debt. I can see why Melrose are interested and imho it's not for good reasons, they are a totally overpriced heap of junk.
From Company Refs:
Melrose had a share price < 60p 2 years ago (227p now), it's eps for 2014 was 0.17p, for 2015 -0.17p, for 2016 3.52p. Forecasts are a possibly magical 9.74p for 2017, 10.8p for 2018.
In the last historical year's accounts (2016) GKN's turnover was £8822 million with £444 million normalised pre tax profit.
In the last historical year's accounts (2016) Melrose's turnover was £889 million with £28.8 million normalised pre tax profit.
If it looks like a joke offer it probably is.

Melrose has earned shareholders good money in capital appreciation an almost 4* increase in share price. Their turnover is all over the place, historical profit of very little. Wouldn't touch it with a bargepole, just don't trust them to take over a much larger company and get the most out of it (they would just sell it off).

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Re: GKN takeover offer from Melrose

#119869

Postby Bouleversee » February 23rd, 2018, 11:13 am

All the press articles I have read seem to be in favour of Melrose's bid, suggesting they would do a better job of turning round the company than existing management. Doesn't mean they are right, of course.

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Re: GKN takeover offer from Melrose

#120474

Postby Bouleversee » February 26th, 2018, 9:55 am


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Re: GKN takeover offer from Melrose

#120545

Postby Bouleversee » February 26th, 2018, 1:49 pm

On the other hand, article in Sunday Times says that GKN workers ((members of Unite union) will lobby MPs on Wednesday and hold a rally to protest against the takeover, which they want Ministers to intervene and block.

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Re: GKN takeover offer from Melrose

#120550

Postby Bouleversee » February 26th, 2018, 2:22 pm


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Re: GKN takeover offer from Melrose

#121090

Postby Riftvalley » February 28th, 2018, 4:09 pm

Hi Guys and amazing amount of information here.

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?

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?

Does unconditional mean that Melrose must offer to purchase all GKN shares, at the offer price.


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.

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Re: GKN takeover offer from Melrose

#121100

Postby Alaric » February 28th, 2018, 4:40 pm

Riftvalley wrote:Does unconditional mean that Melrose must offer to purchase all GKN shares, at the offer price.


I think this is required by the listing rules. The risk warning you quote is of the consequences for non-accepting shareholders.

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Re: GKN takeover offer from Melrose

#121103

Postby Bouleversee » February 28th, 2018, 4:44 pm

But would the options as regards more cash or more shares still be open at that juncture?

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Re: GKN takeover offer from Melrose

#121353

Postby Gengulphus » March 1st, 2018, 1:47 pm

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

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Re: GKN takeover offer from Melrose

#121366

Postby Bouleversee » March 1st, 2018, 2:43 pm

So do I gather that the answer to my question is: "yes"?

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Re: GKN takeover offer from Melrose

#121370

Postby Bouleversee » March 1st, 2018, 2:58 pm

This would appear to be the latest position re treasury stock, fwiw:

https://www.investegate.co.uk/gkn-plc/g ... LC%20Alert

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Re: GKN takeover offer from Melrose

#121581

Postby Gengulphus » March 2nd, 2018, 11:28 am

Bouleversee wrote:So do I gather that the answer to my question is: "yes"?

You shouldn't gather that from what I said, because I was replying to Riftvalley's questions, correcting some information in an earlier post of mine in the process, not replying to your question.

It ("But would the options as regards more cash or more shares still be open at that juncture?") is a good question, and offhand I don't see how the mix-and-match options can remain open after the offer goes fully unconditional and shareholders who have already accepted it start being paid, so I suspect they don't remain open at that point. But I don't actually know, and there's a limit to the amount of trawling through the offer document (the answer is almost certainly somewhere in it) I'm willing to do for the sake of posting here!

So I'll amend my previous answers further to say that they are about accepting the basic offer and the situation if you want to use the mix-and-match options may well be different. I will however add that the mix-and-match options are really only good for expressing preferences, in cases where the shareholder would like a change from the basic offer but is willing to take as much or as little of that change as is available. In cases where they're basically going to insist on achieving a particular change from the basic offer, they have to reckon on it being quite likely they'll have to doing some buying or selling after the takeover goes through (assuming it does) to finish achieving it.

So basically, if (as I suspect) the mix-and-match options don't remain open after the offer goes fully unconditional, the shareholder has to balance two preferences against each other: the preference not to lose flexibility in the event of a better bid emerging, and the preference for their chosen mix-and-match option. The first favours only accepting after the offer goes fully unconditional; the second accepting before the offer goes fully unconditional - and since only they know how strong those preferences of theirs are, neither I nor anyone else can really tell them which preference should win...

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Re: GKN takeover offer from Melrose

#121590

Postby Gengulphus » March 2nd, 2018, 11:40 am

Bouleversee wrote:This would appear to be the latest position re treasury stock, fwiw:

https://www.investegate.co.uk/gkn-plc/g ... LC%20Alert

There appears to be a major typo in that, specifically where it says:

"Following the above transfer of treasury shares, the Company holds 1,718,442,520 ordinary shares in treasury. The total number of ordinary shares in issue (excluding treasury shares) is 7,661,110"

Compare that with the previous such RNS (https://www.investegate.co.uk/gkn-plc-- ... 5236P5FB0/), which says:

"Following the above transfer of treasury shares, the Company holds 8,306,402 ordinary shares in treasury. The total number of ordinary shares in issue (excluding treasury shares) is 1,717,797,228"

Someone at GKN will probably have a very red face about allowing it to be released! If they spot it, that is...

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Re: GKN takeover offer from Melrose

#121614

Postby Bouleversee » March 2nd, 2018, 12:29 pm

That may be Investegate getting it wrong. This is what GKN's website says:

https://www.gkn.com/rdh.ashx?downloadre ... XSVBOCDAIW

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Re: GKN takeover offer from Melrose

#121760

Postby Bouleversee » March 2nd, 2018, 9:16 pm

2 more announcements from GKN:

https://www.gkn.com/rdh.ashx?downloadre ... XZYQRERFAK

https://www.gkn.com/rdh.ashx?downloadre ... XZYQRERFAK

As regards whether all 3 options would still be available if one did not accept before the deadine, I got different replies from Selftrade and IWeb so I am now plodding through the offer document which I can barely read but is what I should have done in the first place. Whether it will provide a definitive answer remains to be seen. I think the worst case scenario will probably be that one will have a somewhat lower chance of getting
one's preferred option because they start dishing out the money and shares once it becomes unconditional so latecomers will be last in the queue. However, there was never any guarantee that one would get one's preference anyway so no big deal and probably better to continue to sit on one's hands. My deadline is Monday and I still find myself vacillating over who will do the best job as regards turning round the company, so I shall probably continue to sit on my hands, knowing that my holding will not make any difference to the outcome..

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Re: GKN takeover offer from Melrose

#122077

Postby Bouleversee » March 4th, 2018, 2:10 pm

Now that GKN have muddied the waters by entering into talks with Ohio-based engineering company, Dana, over a possible tie up/spin-off of its automotive business (to be effected mainly in equity) and Melrose's bid is now worth 18p less than GKN's current share price (both companies fell on Friday), will Melrose increase its offer or pull out? Who knows? It certainly doesn't encourage one to rush into accepting. GKN say they have received multiple approaches for its businesses so everything is up in the air. With hindsight, I wish I had sold my shares immediately the offer was made and the share price shot up. Too many unknown quantities here.

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Re: GKN takeover offer from Melrose

#122368

Postby Gengulphus » March 5th, 2018, 4:02 pm

Bouleversee wrote:That may be Investegate getting it wrong. This is what GKN's website says:

https://www.gkn.com/rdh.ashx?downloadre ... XSVBOCDAIW

It's incredibly unlikely that it's Investegate getting it wrong. Why? Because they handle huge numbers of RNSes and very clearly do not copy them manually from their RNS feed to their website, but instead have computers doing the copying, doubtless with some reformatting and/or putting them in a 'wrapper' to fit in with their website's requirements. Neatly switching two numbers in some text is a typical human copying mistake, not a computer copying mistake - when computers make copying mistakes, the likely results are instead total gibberish, systematic errors such as every 256th character being garbled, or very random errors.

I've tried using your link, without success - it just produces an otherwise-blank page saying "Media was not found". The same happens for the two similar links in your following post. Not blaming you for this - I know that it's not always easy to avoid getting non-working links! - but if the links are important to what you said, you might want to look for some more effective ways for us to view what you're talking about!

I have however found the RNS concerned on the GKN website - it's in https://www.gkn.com/en/investors/regulatory-news/, currently on its 9th page but will probably quite rapidly (*) move deeper, and is https://otp.tools.investis.com/clients/ ... sid=983556. It has the switched numbers problem...

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Re: GKN takeover offer from Melrose

#123166

Postby Bouleversee » March 8th, 2018, 1:36 pm



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