Forget about pensions, forget about price, forget about leverage, and forget about national interests. Ultimately, the hostile takeover battle for GKN will come down to one question, who do shareholders want to run the company: existing management led by a new pairing of chief executive Anne Stevens and finance director Jos Sclater; or the fab four that make up turnaround specialist Melrose?
It’s not an easy decision. Stevens, despite being somewhat unfamiliar to the City, brings a lot to the table. The American has forged a distinguished career at some of the biggest industrial names in her homeland, including as a young executive at Exxon, and then at Lockheed Martin, where she served on the board.
She is also credited with helping Ford to avoid a government bailout during the financial crisis as head of its struggling North American operations, and later as one of executive chairman Bill Ford’s key lieutenants.
And the 69-year-old has quickly seized the mantle at GKN after being unexpectedly thrust into the job last November, only to be facing a hostile bid just weeks later. She has fire in her belly, delivering a frank admission of where the engineering giant has got things wrong and pledging to fix the bits worth saving, while offloading the parts that aren’t. Yet Stevens’s major weakness is that she is a relative unknown among shareholders and hasn’t been in an executive position for nearly a decade.
Sclater is impressive too. Sharp, with an understanding of pensions that would make an actuary blush, he is tipped for great things, but at 44 years old he’s green, and has no experience at board level.
Melrose, on the other hand, are veterans at turning round struggling businesses. Not only do they have decades of experience, but they are among the best at it: improving margins, selling businesses for a big profit and then returning bucket loads of cash to shareholders on a regular basis.
Of seven investments made since the firm was founded in 2003, six have been a success. Shareholders tripled their investment on engineering conglomerate FKI, while Elster, a German metering business bought in 2012 and sold to the American industrial giant Honeywell three years later, generated a 2.3 times return.
That has ensured a huge following among some influential fund managers, many of whom also hold shares in GKN. It is thought as much as 25pc of the company’s investor base also hold Melrose paper. A similar amount is believed to be in the hands of hedge funds and merger arbitrage specialists, the majority of whom will want a deal to happen.div overflow tabindex="0" role="button" aria-label="View more"">>View more!
The odds may be stacked against GKN but to its great credit, it is proving to be a fierce adversary. Its “Project Boost” defence plan promises to deliver change at a quicker pace than Melrose is proposing: its powder metallurgy arm will be offloaded immediately, the company separated in two and £2.5bn returned to shareholders in just three years.
Still, both sides seem in broad agreement about what needs to be done, so now investors have to decide who they think has a better chance of returning this 200-year-old firm back to glory./amp-ad">>
It’s still early days, but if Melrose sweetens the offer and gives shareholders more of the enlarged company, that could be the decisive move.
Fairburn’s words fan the flames
UK companies are the masters of using lots of words but saying nothing. Hats off then to Persimmon boss Jeff Fairburn for taking this long-established art to questionable new heights with a statement about his controversial bonus that succeeds in shedding precisely no light on the matter whatsoever.
In fact, Fairburn may have been better off staying quiet because this ham-fisted move risks inflaming matters even further – quite the achievement considering the widespread uproar that his £110m mega-payout has generated.
Investors, pressure groups, rivals and even church leaders have lambasted him. One shareholder recently told us that it was an obscene amount for “putting up a few timber-frame houses”.
If Fairburn was serious about addressing the criticism then he would have either admitted to a serious error of judgment and handed a substantial chunk of the money back, or kept it and stood down. This is what a coalition of major shareholders is demanding.
Instead, he simultaneously manages to claim responsibility for the mess, while blaming the structure of the bonus scheme, having a dig at its architects, and whining that he didn’t ask for the windfall, as if somehow that forces him to hold on to it.
Worse though is the total failure to shed light on what he plans to do with such a vast amount of money. Fairburn says he realises that it was a mistake to see this as a personal matter but a pledge to give an unquantified amount to unnamed charitable causes is so vague as to render the gesture meaningless.
He also claims to regret that the controversy has overshadowed his employer’s performance. Yet such hollow-sounding words only threaten to prolong what has already proven to be a hugely damaging distraction.
Source : http://www.telegraph.co.uk/business/2018/02/14/gkn-future-depends-investors-faith-leaders/amp/1071