Dowlais deal shows crisis in the UK stock market is getting worse
Dowlais deal shows crisis in the UK stock market is getting worse
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It should be the GKN Automotive owner taking over its US rival American Axle, not the other way around. There goes another hidden gem of the UK stock market, and the mini-tragedy in this case is that the deal ought to be structured the other way around. It should be Dowlais, the FTSE 250 company whose main business carries the grand historic UK manufacturing name of GKN Automotive, buying its US rival, Detroit-based American Axle.
![[Nils Pratley]](https://i.guim.co.uk/img/uploads/2017/10/09/Nils-Pratley,-R.png?width=180&dpr=1&s=none&crop=none)
Instead, the transaction is a cash-and-shares offer for Dowlais at £1.16bn, or 85p a share. The terms cannot be described as punchy when you remember that the business was demerged from FTSE 100 firm Melrose at 120p as recently as 2023. Dowlais was always the smaller sibling in the old GKN, the mainly aerospace company bought by Melrose in a fiercely fought hostile takeover in 2018. But the demerger and independence was supposed to herald a new era of opportunity for a restructured business that has genuine claims to being world class in its field. It is the world’s largest maker of drive systems – the bit of the vehicle that connects the wheels to the engine – and looked more likely to be predator than prey in any round of consolidation among global car components manufacturers.
Instead, the opportunity on the table is to fold itself into a US company that is smaller in terms of revenues, stock market value and number of employees (30,000 plays 20,000). No doubt the industrial logic is sound but this is a reverse takeover in effect – thus the need for half the offer price to be in cash to ensure American Axle’s shareholders emerge with 51% of the combined entity.
