Shareholders in FTSE 100 engineer GKN (GKN) have until 29 March to decide whether to accept a takeover offer from turnaround specialist Melrose Industries (MRO). One alternative is to support a deal to merge GKN’s Driveline automotive arm with US engineering group Dana.

Melrose originally offered 405p per share in cash and shares on 8 January. That was rejected by the board and triggered Melrose to increase its offer to a deal worth 430.1p per share on 17 January.

A third and final offer was pitched on 12 March at 467p per share, split into 81p cash and 1.69 new Melrose shares for each GKN share. The offer works out as 460.7p per share if you exclude GKN’s final dividend announced in February.

The Dana proposal would see GKN shareholders receive 47.3% of the share capital of the enlarged Dana. GKN would also get $1.6bn (£1.15bn) cash. The enlarged Dana group would be listed on the New York Stock Exchange.

Melrose shareholders have already voted in favour of buying GKN. However, GKN’s board prefers the Dana deal, having rejected all three of Melrose’s proposals on the ground they ‘fundamentally undervalue’ the business.

‘Melrose is not the right owner of GKN,’ says GKN chairman Mike Turner. ‘Its management lacks relevant experience and its short term business model is inappropriate for GKN’s customers and its investors. Winning new business in our markets would be more difficult if customers were uncertain as to the identity of their future long term partners.’

The bid battle has been a bitter battle of words between management, unions and politicians for the hearts and minds of GKN shareholders.

GKN’s pension fund trustees and union representatives have spoken out over future scheme funding and workers job security under Melrose ownership.

Complicating matters further is a Parliamentary Select Committee investigation into the hostile takeover, with questions posed to the management teams of both Melrose and GKN on 7 March. This was sparked by perceived concerns over UK national security because of the sensitive nature of some of GKN’s defence contracts.

The Select Committee has the power to scupper the deal entirely, regardless of whether Melrose gets majority backing from GKN investors.

A timetable for voting on the Dana proposal has yet to be published although the current guidance is for shareholder votes to be held in the early part of the fourth quarter this year. Both Dana’s and GKN’s shareholders would need to vote on the deal. (SF)

‹ Previous2018-03-15Next ›