What does Melrose Industries PLC’s raised offer for GKN plc mean for investors?

Melrose Industries PLC (LON:MRO) (MRO.L) has increased its offer for GKN plc (LON:GKN) (GKN.L)

GKN
GKN

Melrose Industries PLC (LON:MRO) (MRO.L) has announced today that it has increased its offer for GKN plc (LON:GKN) (GKN.L). It is a final offer and values the company at 467p per share.

The offer is made up of 1.49 new Melrose shares, as well as 81p in cash per GKN share. Investors have until 29 March to make a decision regarding the offer.

GKN has responded to the offer by releasing a statement saying that it is considering the bid. It intends to make a full statement in due course.

Of course, recent weeks have seen a number of releases by both companies regarding a potential takeover. Both have made strong cases for and against a bid, with Melrose suggesting that it has the capacity to add significant value to the business.

Its recent results showed in my view that it is performing well with its owned businesses. Although there have been challenges in the past, it seems to have a sound track record of improving the performance of companies that it owns.

At the same time, GKN’s management team is in the process of putting in place a new strategy. This could see various parts of the business disposed of or spun-off. This could create a more efficient company in my view which is better able to deliver innovation and adaptability in a fast-paced global engineering industry.

Clearly, it is an uncertain time for the business. However, I believe that it could prove to be a successful company whether it is acquired by Melrose or not. It has a PE of around 12 and is expected to return to double digit growth in the next financial year.

Therefore, I’m optimistic about its long term future, although its share price and news flow could be volatile in the near term as the bid approach plays out.








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Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email info@investomania.co.uk or use one of the other contact methods available on the 'Contact Us' page