The factory turnaround king attempting to repeat the stellar success of his old bidding vehicle, Melrose Industries, has revealed he considered a New York listing for his new venture before opting for London.
Simon Peckham, 61, who is leading a team of former Melrose dealmakers in launching a repeat venture, Rosebank, successfully raised £50 million from outside investors before a first dealing in the shares on London’s junior Aim market on Thursday.
BlackRock of the US and the sovereign wealth funds of Norway and Singapore, respectively Norges and GIC, were revealed as some of the cornerstone investors, each taking stakes of more than 5 per cent in the new company.
“It would be stupid to say we didn’t think about it [a US listing], but we are a UK-based business and we like it here,” Peckham said. “The idea you can’t access a worldwide investment commitment from London is nonsense.”
The deal is the first initial public offering in London under the new Labour government. It comes amid a string of reforms aimed at helping the UK polish up its fading appeal for flotations after losing out to other jurisdictions, notably New York and Amsterdam.
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Rosebank aims to snap up an underperforming manufacturer in the US, UK or northern Europe and attempt to turn it around under the same “buy, improve, sell” formula that worked so well for Melrose.
Melrose targeted a number of manufacturers on both sides of the Atlantic, culminating in its contentious £8.1 billion hostile takeover of GKN, the car and plane parts maker, in 2018. Investors who backed it from the start in 2005 ended up making a 3,396 per cent return on their capital over 19 years, according to the Rosebank admission document.
Peckham said the aim was to step up to a full listing in London, to raise more capital when the first target was identified. He said he was typically looking for deals with an enterprise value of about $3 billion.
Other investors buying into the placing on Tuesday at £2.50 a share included Aviva, Artemis and Permian Investment Partners, the US hedge fund. Other investors were turned away and some of the successful ones had their offers scaled back.
Peckham was one of the three founders of Melrose, stepping up to the chief executive role in 2012. His colleague there, Justin Dowley, is chairman of the new venture, while another former Melrose executive, Christopher Miller, is senior independent director.
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The executives are on a similar reward scheme to that of Melrose, taking 10 per cent of the profits above a hurdle rate of return of 8 per cent a year.
That incentive plan raised eyebrows with some after GKN was split in two, with the dealmakers taking huge bonus payments from the successful airplane parts division, but not taking any offsetting pain from the Dowlais car parts division, which struggled.
On Tuesday Peckham insisted he and his fellow executives were “completely aligned” with outside investors. Investors in Rosebank had seen the incentive arrangements and were satisfied, he said.
He has personally invested £1.35 million for a 2.7 per cent stake in Rosebank and said he would be willing to put in £5 million more in any subsequent capital-raising.
Peckham said it was too early to make a judgment on the new government but warned that it needed to be “balanced” in its plans to increase job security for new recruits. There was a balance between improving job security while also encouraging firms to employ people, he added.
