Wednesday, 4 April 2018

Just a bit more on GKN

Here are a couple of things I noticed over the past few days. Anyone sharing my interest in this should have a read of John Collingridge's great piece looking at the end of the bid process. There are some really interesting nuggets in there.

For example, it appears that both LGIM and Blackrock backed the Melrose bid:

Neither manager has made any public statement as far as I am aware, something I increasingly think is going to have to change in future bid situations. Note the claim that LGIM didn't get back to GKN - I would a bit surprised if this is true. Incidentally, I don't think anyone "voted" their shares, they accepted the bid.

Blackrock's position is obviously also of interest given that this was a big call since Larry Fink's letter to corporates saying don't just think about the money. The other major stakeholder group in GKN - employees - was opposed to this deal along with management. If Blackrock still approved the bid, this gives us an idea of how that guidance may play out in practice.

The other really interesting bit in the article is the suggestion that Melrose was scrabbling around at the last minute to make sure it got over the 50%+ acceptance level:

This suggests that the result was very close indeed. 50m shares out of a total float of 1.72bn is 2.9%. If total acceptances were 52.3% then if these shares had not been pledged Melrose would have been short of the necessary level of acceptances. However, as I blogged previously, the hedge funds didn't largely hold shares, which makes me really curious about this. Was this a question of a bank counterparty having to pony up the shares, or did the hedge fund have to ultimately acquire shares to pledge them? If the latter did this change the expected returns from their trade - if so Melrose owe them one. And a missing 50m shares really narrows the possibles list down - how many hedge funds had a total position of 2.9% (or more)? This deserves more digging.

Finally, it's worth noting the total disclosed short positions in Melrose in the FCA list have gone back UP - over 13%, and some new names in the list (although they could have been sitting under the 0.5% level reported by the FCA). Note several of the positions date from 29th or 30th March - the day of the bid and the day after. Melrose's share price actually went up slightly post the bid result. Anyway, I'll keep an eye on it.


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