Melrose set to keep tight grip on GKN spin-off
>
Melrose intends to keep a firm hold on the reins when it spins GKN’s auto business to the London Stock Exchange in the spring
- Demerger is Melrose’s latest move after it acquired GKN for £8.1bn
- Melrose restructured the company and closed GKN’s automotive engineering plant
- It now plans to spin off GKN’s aerospace business from the automotive industry
Melrose plans to keep a firm hold on the reins when GKN’s car business moves to the London Stock Exchange in the spring, the Mail can reveal.
The split will be the latest move from Melrose – which buys, improves and resells struggling industrial companies – after taking over engineering giant GKN for £8.1bn in a hotly contested takeover in 2018.
Melrose’s pursuit of GKN, which traces its roots to the industrial revolution, had been the largest hostile takeover battle since Kraft’s move to Cadbury a decade earlier.
Since then, Melrose has restructured the company, including the closure of GKN’s automotive engineering plant in Birmingham, with the loss of 500 jobs by 2021.
The Erdington site was known for making powertrain systems for the automotive industry, with customers including Jaguar Land Rover.
Making changes: Melrose’s pursuit of GKN had been the biggest hostile takeover battle since Kraft’s move to Cadbury a decade earlier
The late Jack Dromey, then a local Labor MP, described the closure as a ‘hammer blow’ for Erdington, one of the UK’s most deprived areas.
In another twist in the saga, Melrose now plans to spin off GKN’s aerospace business from the automotive business to float the latter on the London Stock Exchange in April, renaming it Dowlais.
The name Dowlais is a nod to the South Wales village that was home to the industrial revolution iron and steel works of the Guest family, one of the founders of the original Guest, Keen and Nettlefolds, later renamed GKN.
The new company will be led by Liam Butterworth, who has been appointed by Melrose to lead GKN Automotive in 2018.
“The hard work and restructuring is over,” said a source at GKN.
But investors hoping for a clean break will be disappointed. The Daily Mail may reveal that Simon Peckham – the founder and chief executive of Melrose and architect of the GKN deal – and its chief financial officer Geoffrey Martin will both become non-executive directors in the newly launched company, with Melrose also taking a 3 percent keep commitment.
“We don’t want to lose their know-how,” the source added.
The split was announced in September and a prospectus for Dowlais is expected on March 3 ahead of listing the following month. The float is expected to be one of the largest on the London Stock Exchange this year, with an annual turnover of £5.2 billion.