GKN spent £107million on advisers in the run up to Melrose Industries’ controversial £8.1billion takeover deal, it was revealed today.
By the end of March, GKN had racked up debts of £1.12billion, up from £889million at the end of last year.
In a bid to fend off Melrose, GKN engaged a string of advisers, including banks JP Morgan, Barclays, Credit Suisse and UBS.
Costs: GKN spent £107million on advisers in the run up to Melrose Industries’ controversial £8.1billion takeover deal
In the run up to the deal, 259-year old GKN previously estimated its costs for advisers to be around the £80million mark.
As part of its strategy to thwart Melrose’s plans, GKN tried to offload its automotive parts arm, Driveline, to US firm Dana.
GKN ended up not offloading Driveline, meaning it ended up having to fork out £40million for a break fee payment.
Melrose said GKN’s profits had come in below expectations during the first quarter, with operating profits down from £215.1million to £181.5million, while sales remained broadly flat at £2.6billion.
The group said the numbers showed a ‘continuation of the trend’ of GKN prioritising sales growth at the expense of operating margins.
GKN’s aerospace division saw revenues fall by 1 per cent as the North American business ‘continued to struggle and was loss-making for the period.’
Melrose described the operating performance of the unit as ‘unacceptable’, adding that the division was now a top priority.
The Driveline business delivered sales growth of 7 per cent over the period, but profits remained flat.
Debts: By the end of March, GKN had racked up debts of £1.12billion, up from £889million at the end of last year
In the trading update, Melrose said: ‘The GKN performance in the period before Melrose ownership showed trends below current market expectations for GKN for profit and cash generation.
‘While this gives Melrose a lower starting point for GKN than current market consensus opinion, Melrose allowed for further under-performance by GKN prior to its ownership in its acquisition assumptions, and remains confident it will be able to deliver on all the statements it made during the offer period over the medium term, including creating significant shareholder value by improving the performance of the GKN businesses over time and being a responsible owner for all stakeholders.’
Since GKN’s shareholders voted in favour of Melrose’s takeover bid last month, GKN’s chief executive, Anne Stevens, and chief financial officer, Jos Sclater, have stepped down.
GKN’s share price is down 1.17 per cent to 454.5p.
Controversy: Melrose’s bid for GKN stirred up controversy from the outset