Published: Thu, March 15, 2018

GKN Rejects Raised Final Offer From Melrose Industries (ALLISS)

GKN Rejects Raised Final Offer From Melrose Industries (ALLISS)

Melrose unveiled a new offer for the engineering company this morning, increasing its bid to £8.1bn, or 467p per share, having previously offered £7.4bn.

Melrose responded by turning hostile and taking its offer directly to GKN's shareholders, putting pressure on the engineer's newly appointed chief executive, Anne Stevens. The move came after the blue-chip company agreed a deal last week to merge its automotive division with Dana.

Melrose - a FTSE 250-listed industrial turnaround firm - increased its bid to 1.69 Melrose shares for every GKN share held, plus an unchanged 81.00 pence in cash, together equivalent to 467.00p per share based on Melrose's share price at the close on Friday.

GKN, which makes parts for vehicle companies and aircraft manufacturers, cited the impact of Melrose's share price fall on the value of the bid as a reason for spurning the offer. The deadline for acceptances is 1.00 p.m. on Thursday, 29 March.

It described the board of GKN as 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".

As part of its new, final offer, Melrose increased only the share element of its deal. The previous offer made in January was 1.49 new Melrose shares plus 81 pence cash.

Melrose is not the right owner of GKN.

While the shares rose as much as 2.7 percent, GKN said its own proposal is worth more than £5.

"The deal signed with Dana means that over two thirds of the group's gross pension liabilities, including approximately 85% of the gross United Kingdom pension liabilities, will remain with the GKN group following the sale even though less than half of the profits of the group are retained", Miller said.

Politicians were also concerned that Melrose could break up GKN and sell parts to foreign buyers, potentially compromising British and US national security because of GKN's work on defense programs - the company makes components for the Eurofighter Typhoon combat jet.

However, in his letter, Melrose's Christopher Miller said if the Dana transaction proceeded, it would leave GKN shareholders "with a minority stake in a foreign listed group run by a Dana management team based in Ohio".

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