Melrose Industries

Melrose Industries plc (LSE: MRO) is a British manufacturing company that specialises in buying and improving underperforming businesses. Its shares are listed on the London Stock Exchange as a constituent of the FTSE 100 Index. Melrose serves customers in the United Kingdom and United States.

Melrose Industries plc
TypePublic limited company
LSE: MRO
IndustryManufacturing
Founded2003
FounderChristopher Miller
David Roper
Simon Peckham
HeadquartersLondon, England, UK
Key people
Revenue£10,967 million (2019)[1]
£318 million (2019)[1]
£(51) million (2019)[1]
Number of employees
56,000 (2019)
Websitewww.melroseplc.net

Melrose Industries was founded in 2003 by David Roper, Christopher Miller and Simon Peckham. In terms of business practices, the company aims to buy and turn around underperforming businesses. Melrose has acquired, and in some cases also sold on, numerous engineering companies, including Dynacast, McKechnie, FKI,Elster, Nortek, and GKN. Its acquisition techniques have allegedly included hostile takeover tactics;[2] Melrose has also been publicly criticised for issuing high paying performance linked incentive schemes to its top executives.[3]

History
Sculpture at Melrose's head office at Leconfield House in Curzon Street, London

In 2003, Melrose Industries was launched on London's Alternative Investment Market with an initial market capitalisation of £10m; it had been established that same year by three individuals: David Roper, Christopher Miller and Simon Peckham.[4] For many years, the three founders have been directly involved in managing the company; between 2003 and 2010, Melrose was headed by David Roper.[5]

Melrose acquired Dynacast, a manufacturer of diecast parts and components, and McKechnie, an engineering group, in 2005;[6] it divested both McKechnie Aerospace and McKechnie PSM in exchange for $855m two years later.[7] In early 2008, it bought FKI, an engineering business that included the Brush Turbogenerators unit, in a £480m deal.[8] The company opted to sell on Dynacast for $590m in 2011.[9] During June 2012, Melrose sold McKechnie Plastic Components to Swedish firm Rosti for £30.7m.[10]

During August 2012, it acquired Elster, a metering business, for $2.3bn.[11] In July 2015, Melrose sold Elster to American engineering conglomerate Honeywell in a £3.3bn deal;[12][13] of this windfall, £2bn was distributed to Melrose's investors while the remainder went to other corporates purposes, including debt reduction.[14]

On 29 September 2015, Melrose Industries incorporated a new corporate structure.[15] During the late 2010s, the company was reportedly subject to vigorous criticism over the generosity of its long-term bonus scheme, which paid out £167m to Melrose's four bosses over its performance in 2018, during which revenues and profits had both dramatically increased.[3][16][17] Melrose has reportedly gained the backing of multiple leading market institutions, such as Schroders and Fidelity.[4]

In July 2016, the company acquired Nortek, a ventilation equipment manufacturer, for £2.2 billion.[18] By 2018, Nortek was reporting a 52 per cent increase in adjusted operating profits across the previous year, having met its original three-to-five-year targets for the company within 18 months.[19]

During January 2018, Melrose Industries announced its plans to purchase GKN as well as the firm's restructuring thereafter;[20] that same month, GKN's management rejected the initial bid made.[21] In March 2018, Melrose submitted a revised £8.1 billion bid for the company; this bid was controversial and was subject to criticism, being branded by some press agencies as a hostile takeover.[2][22] Melrose's offer received shareholder support and was accepted.[23][24] Following a formal review of the purchase, including of various objections put forward by GKN workers and trade unions, the UK Government allowed the transaction to proceed in April 2018;[25][26] Melrose agreed to comply with several national security measures.[27]

In October 2019, Melrose Industries announced the appointment of Funmi Adegoke to its Board as an inaugural independent non-executive Director.[28][29]

During 2020, David Roper, one of the Melrose's three original founders, is set to step down as executive vice-chairman and depart the firm; the move was allegedly due to disagreements over recent business strategy.[5]

Operations

Melrose's main subsidiaries are Brush Turbogenerators,[8] GKN[27] and Nortek.[18]

References
  1. "Preliminary Results 2019" (PDF). Melrose Industries. Retrieved 5 March 2020.
  2. Phil Serafino, Benjamin D Katz (17 January 2018). "Melrose Makes $10.2 Billion Hostile Offer to Acquire GKN". Bloomberg. Retrieved 1 May 2018.
  3. Tovey, Alan (30 March 2019). "Melrose feels the heat over payouts to top executives". The Telegraph.
  4. Kollewe, Julia (29 March 2018). "Melrose trio who sought biggest deal yet with GKN – and biggest challenge". The Guardian. Retrieved 6 January 2020.
  5. Lyall, Ian (9 May 2019). "Melrose Industries says co-founder to quit; trading in line with expectations". proactiveinvestors.co.uk.
  6. "Melrose engineers £429m deal". The Telegraph. 22 April 2005. Retrieved 10 April 2016.
  7. "Melrose sells McKechnie Aerospace in $856m deal". Reuters. 26 March 2007.
  8. "FKI accepts £480m bid from Melrose". FT. 22 April 2008. Retrieved 10 April 2016.
  9. "Melrose sells Dynacast for $590m". Financial Times. Retrieved 30 March 2015.
  10. "Melrose sells £70m turnover McKechnie". Insider Media. 26 June 2012. Retrieved 10 April 2016.
  11. "Melrose to Acquire Elster for $2.3 Billion to Add Metering". Bloomberg L.P. 29 June 2012. Retrieved 26 June 2014.
  12. "Melrose shares soar on £3.3bn sale of Elster to Honeywell". 28 July 2015. Retrieved 10 April 2016.
  13. MacDonald, Alex (28 July 2015). "Honeywell Pays $5.1 Billion for German-Based Elster". Wall Street Journal.
  14. Tovey, Alan (28 July 2015). "Melrose investors in line for £2bn payout after Honeywell buys Elster". The Telegraph.
  15. "Melrose Industries Plc". Companies House. Retrieved 6 January 2020. Incorporated on 29 September 2015
  16. "Total FTSE 100 Chief Executive pay has increased by 11% in the past year". cipd.co.uk. 15 August 2018.
  17. Robinson, Jon (20 February 2018). "Melrose revenue smashes £2bn mark". insidermedia.com.
  18. "Melrose bets £2.2bn on US housing growth with Nortek takeover". The Telegraph. 6 July 2016. Retrieved 2 September 2016.
  19. Dines, Tom (20 February 2018). "Melrose delivers on Nortek". investorschronicle.co.uk.
  20. Gubisch, Michael (15 January 2018). "Melrose presents GKN takeover plan to shareholders". Flight International.
  21. Gubisch, Michael (12 January 2018). "GKN to reorganise after rejecting takeover bid". Flight International.
  22. Finch, Julia (29 March 2018). "What's the controversy over Melrose's hostile takeover of GKN?". The Guardian.
  23. Gubisch, Michael (29 March 2018). "Melrose wins shareholder support for GKN takeover". Flightglobal.
  24. Robert Wall (29 March 2018). "Melrose Industries Wins Bruising Takeover Battle for Britain's GKN". The Wall Street Journal. Retrieved 1 May 2018.
  25. "GKN takeover concerns to be assessed by government". BBC News. 30 March 2018. Retrieved 3 April 2018.
  26. "The future of GKN inquiry: Business, Energy and Industrial Strategy Committee". parliament.uk. March 2018.
  27. "GKN takeover given green light". Reuters. 24 April 2018. Retrieved 24 April 2018.
  28. Media, Insider. "Melrose appoints inaugural non-executive chairman". Insider Media Ltd. Retrieved 2020-03-24.
  29. Arbor, Giles (2019-10-01). "Melrose Industries PLC Appoint Funmi Adegoke as Independent Non-Executive Director". DirectorsTalk Interviews. Retrieved 2020-03-24.

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