GKN faces new £8.1bn Melrose bid in takeover battle

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Turnaround specialist Melrose has increased its offer for UK engineering giant GKN from £7.4bn to £8.1bn.

It has also raised the amount GKN shareholders would own in Melrose following the deal from 57% to 60%.

GKN has fought hard against the offer. It has offered to give back £2.5bn to shareholders and agreed to merge its car unit with US company Dana.

The takeover battle has also entered the political arena, with some MPs calling for the bid to be blocked.

‘Final’ offer

GKN, which makes parts for the Boeing 737 jet and Black Hawk helicopter, as well as components for Volkswagen and Ford cars, became a target after it issued profit warnings late last year.

Melrose said all recent attempts to engage in “constructive discussions” with GKN had been blocked. It added that its latest offer was “final” and would “not be increased under any circumstances”.

It is offering 467p a share, compared with Friday’s closing share price of 435p. Melrose is offering to give shareholders £1.4bn in cash as part of its offer.

However, investors appeared unimpressed by the latest move. Shares were up less than 2% in early trading at 444p.

Also on Monday, GKN issued its latest defence against the Melrose approach.

However, this was based on Melrose’s previous offer, which it said was “opportunistic” and “fundamentally undervalues” GKN’s prospects.

Pension worries

GKN has fought hard against the approach from Melrose, a firm that specialises in buying up industrial companies it believes are undervalued and restructuring them before selling them on.

The takeover approach has also raised fears among unions and MPs that GKN, one of the UK’s largest industrial firms, will be broken up and sold to overseas owners.

The Pensions Regulator has warned that the Melrose takeover could affect the company’s ability to fund its pension scheme.

Last week, a cross-party group of MPs wrote to the Business Secretary, Greg Clark, saying the Melrose takeover should be blocked.

GKN shareholders have until 29 March to decide whether or not to accept Melrose’s offer.

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Melrose called GKN’s attempts to fend off the approach a “hasty fire sale of GKN businesses before they have reached their potential”.

In its offer statement, Melrose chairman Christopher Miller appealed to GKN’s shareholders.

“On the one hand you can join us on a journey of value creation by investing in a UK listed manufacturing powerhouse worth over £10bn today and receiving £1.4bn of cash,” he said.

“On the other hand your board is attempting a hasty fire sale of GKN businesses before they have been given a chance to reach their potential and with damaging consequences, we believe, for all stakeholders.”

On Friday, GKN agreed to merge its Driveline division with US auto-engineer Dana in a deal worth $6.1bn (£4.4bn). The deal would see GKN shareholders end up with a 47.25% stake in the enlarged, US-listed group.

However, Mr Miller said the proposed deal was likely to involve a “lengthy and uncertain completion process” with competition authorities, and added that some GKN investors would not be able to hold the shares as they would not be listed in the UK.

A brief history of GKN

Founded in 1759 as an ironworks in South Wales

Involved in aerospace, automotive, materials and manufacturing engineering

Operates in 30 countries with 59,000 employees

Employs 6,000 staff in the UK, mostly in aerospace and automotive technology

Ten UK sites, including Bristol, Cowes, Luton, Portsmouth, Birmingham and Telford.

Chief executive Anne Stephens took over in January

GKN faces new £8.1bn Melrose bid in takeover battle

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