How Melrose turned its GKN acquisition into two listed companies

Control arrived before the final shares

Melrose’s 2018 accounts recognise 19 April as the acquisition date because it obtained control then, with about 85% of GKN’s issued capital. It recorded £7.091 billion of consideration at that point. The remaining stake cost £1.260 billion by 30 June and the accounts treated it as a purchase of a non-controlling interest after control. Source 2

The government commitments belonged to the takeover

The government’s March 2018 response recorded legally enforceable commitments on Melrose’s UK listing and headquarters, residence of a majority of directors and retention of rights to the GKN name in specified businesses. Its R&D commitment used the existing GKN investment level and ran for five years. The response records undertakings and their terms. Source 1

Three operating businesses went into Dowlais

The split transferred GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen, an early business that had grown out of Powder Metallurgy. Aerospace was the focus of the continuing Melrose group under the circular. Dowlais’s admission on 20 April 2023 established its shares as separately tradable on the London Stock Exchange’s main market. Source 3 Source 4

What 300 old shares became

The two steps can be read in order. A holding of 300 pre-consolidation Melrose shares became 100 new Melrose shares at the one-for-three rate. The one-for-one distribution then delivered 100 Dowlais shares alongside those 100 Melrose shares. The numbers show how the two ratios combine. The share count alone provides no measure of the two holdings’ value. Source 3

Sources

• UK government response to the takeover
• Melrose 2018 annual report, notes 1 and 12
• Melrose shareholder circular, Parts I and II
• Dowlais demerger completion and admission