Melrose revealed as FKI's £412m suitor

Nick Clark
Tuesday 05 February 2008 01:00

Melrose, the investment group focused on UK industry, has emerged as the suitor behind a £412m approach to the engineering group FKI.

Melrose said in a regulatory news statement released to the market yesterday that it had made a preliminary approach to FKI's board last Thursday.

The investment group said it had made the approach "with a view to entering into discussions about a possible offer for FKI" at 70p per share. It cautioned that there was "no certainty" that it would launch an offer.

FKI revealed on Friday that it had received an approach, although it did not name the suitor. A spokesman for the group said that it had no further comment to make following Melrose's announcement.

This is not the first time that FKI has been approached, but Thursday's offer was almost half the value of the previous bid.

It revealed an approach last May, again without naming the interested party, worth £765m. The negotiations fell apart in August.

FKI's shares peaked at 140p in June, but spiralled after the takeover collapse to as low as 48.25p last month.

The Melrose source said that it saw an opportunity in FKI, but would likely walk away should the engineer rebuff its offer. He added: "The group is casting its eye over bigger fish. It has the firepower to do a big deal, and the market reckons it could raise up to £2bn."

Recently, Melrose appointed JP Morgan Cazenove as joint broker alongside Investec. The move was interpreted in some quarters as indicating that it was ready to target bigger acquisitions.

Melrose listed on AIM in October 2003, and moved up to the main market in 2005. Its business model is almost a private equity-style strategy of buying underperforming businesses, overhauling the structure and selling them on in a short time frame.

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