GKN gaffe as Melrose rival sweetens offer

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The battle for the future of GKN became even more frantic on Monday as its chief executive was forced into an embarrassing climbdown.

The engineering group retracted claims of shareholder support for its proposed future ownership as US group Dana increased its cash offer to buy GKN’s automotive unit, Driveline.

It is the route favoured by GKN as it faces a separate, hostile, takeover approach from Melrose – a turnaround specialist.

GKN hopes to merge its automotive business with Dana in a deal worth £4.3bn ($6.1bn). The British company would then focus on its aerospace business.

The new sweetened offer would mean GKN receiving an additional £100m in cash.

“GKN has reinvented itself numerous times in its 250-year history. We are confident that, following the Dana transaction… GKN will become a pure play aerospace company with a strong balance sheet,” Mike Turner, chairman of GKN, said in a statement to investors.

GKN built Spitfires as part of its contribution to the war effort in the Second World War
Image: GKN built Spitfires as part of its contribution to the war effort in the Second World War

“We believe that the true value of GKN is over £5 per share and that Melrose’s final offer fundamentally undervalues your company and should be rejected.”

Melrose has offered £7.8bn to buy GKN, valuing each share at about 457 pence, according to GKN.

Its bid has been opposed by politicians and unions, along with GKN, who fear it may later seek to restructure and sell parts of the business in a move that would hurt jobs and Britain’s industrial base.

Last week, Melrose said it would inject £1bn into GKN’s pension scheme and pledged to be a “good custodian for all stakeholders”.

Shareholders have until Thursday to vote on the Melrose proposal.

GKN said on Monday its deal with Dana would mean it receiving £1.25bn in cash after deducting £707m for the transfer of its pension deficit to the combined Dana-GKN Driveline group.

Shareholders of the Redditch-based company would own 47.25% of the combined company listed on the New York Stock Exchange and London Stock Exchange.

GKN’s shares were little changed in early trading on Monday as Thursday’s 1pm deadline loomed.

The British company had earlier taken extraordinary measures to clarify and retract comments executives made to the Sunday Telegraph and Sunday Times relating to Melrose’s offer.

Anne Stevens, chief executive, told The Sunday Telegraph she was convinced “investors will back [GKN]”.

Jos Sclater, group finance director, told the Sunday Times that “long-only shareholders are mostly supportive of existing management, and understand that the Dana deal and becoming a pure play aerospace company has, longer term, significantly more value than the Melrose bid”.

In a statement to the London Stock Exchange the company said: “GKN confirms that these statements of shareholder support in respect of GKN were not verified and are hereby retracted.”

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Christopher Miller, Chairman of Melrose, said responded to the developments: “Today’s tweak of terms on the sale of Driveline to Dana does not offset the 7% reduction in equity value since the announcement.”

He added: “The last-minute attempts of claiming shareholder support that then had to be retracted is a sign of desperation.

“We urge shareholders to cast their votes for a proven Melrose team with an outstanding track record and a plan to revitalise GKN, creating tremendous value and outcome for all stakeholders.”

From – SkyNews

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