Published: Thu, March 15, 2018
Global | By Craig Ferguson

Melrose ups offer for GKN, says latest bid final

Melrose ups offer for GKN, says latest bid final

That would leave GKN shareholders owning 60 per cent of Melrose.

"We ask for shareholders' support as we continue with the transformation of GKN". The previous offer made in January was 1.49 new Melrose shares plus 81 pence cash.

As part of its new, final offer, Melrose only increased the share element of its deal. "In our view it is structured in a way prejudicial to GKN shareholders' interests". "Due to this, we have shared our concerns about the proposed hostile takeover bid by Melrose and want to express to you why we believe the takeover should not succeed".

"From the very beginning, our preference has been to reach an agreement rather than carrying out a public debate", Melrose Chairman Christopher Miller said.

In a message to GKN shareholders, Melrose said the GKN board, in hiving off its automotive division to Dana, "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".

In a letter to GKN shareholders, Melrose chairman Christopher Miller hit out at the takeover target's own efforts to fight off the hostile bid, particularly GKN's recent agreement to merge its automotive business with U.S. firm Dana in a 6.1 billion USA dollar (£4.4 billion) deal.

The deal with Dana could now force Melrose to raise its bid.

It added that the merger gives Driveline an enterprise value, which includes debt, of $6.1 billion, based on Dana's closing share price of $26.20 on Thursday.

The British company, customers of which include Fiat Chrysler and Volkswagen, will also receive $1.6 billion in cash while $1 billion of GKN's pension deficit will be transferred to the combined business. This is after deducting USD1.0 billion for a transfer of a pension scheme deficit to Dana PLC.

Melrose argued on Monday that GKN's Dana deal was "ill-thought-through" and would face regulatory hurdles.

Melrose's potential takeover of GKN has prompted worries from British politicians about United Kingdom jobs being lost and the country's engineering know-how ending up in foreign hands. It also forces GKN shareholders to accept shares in a USA firm which many would not be able to hold, and they also would have to pay tax on those Dana shares.

"All remaining required regulatory approval processes, including CFIUS [Committee on Foreign Investment in the US], have been initiated and are progressing well", Miller explained.

"The outcome of the disposals would leave behind a GKN Aerospace business burdened by a disproportionate, and very substantial, amount of gross pension liabilities, inappropriate for the size of the underlying business". "This brings a material increase in risk to the remaining group". "Shareholders should be concerned that the future GKN Aerospace business may be hampered in its ability to compete and invest on the global stage". It added that it was extending the offer until March 29.

GKN said in response it was evaluating the new offer. GKN shareholders will need to approve the merger, which means they will have to weigh its merits against a Melrose deal. "GKN Directors will do the same in respect of their own beneficial shareholdings".

Shares in Melrose, a UK-based industrial turnaround specialist, fell 5.1 percent to 213.2 pence, dragging down the value of the bid to 441.3 pence.

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