Melrose increases GKN bid to £8.1bn in 'final offer'
15 March, 2018, 03:50 | Author: Gregory Stephens
Melrose Industries has tabled a £8.1bn offer for Redditch-headquartered engineering giant GKN which it said would "not be increased under any circumstances".
GKN also said Melrose's second hostile bid does reflects neither the return of up to £2.5bn in cash to GKN's shareholders over the next three years, "a significant part of which is expected to come in the next 12 to 18 months", nor an "illustrative trading sum-of-the-parts value of GKN as presented in GKN's second response circular, which illustrates a value of over 500p per GKN share".
"We have recently made attempts to engage in constructive discussion with the GKN board with a view to agreeing the terms of a recommended offer", Melrose said in the letter.
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.
FTSE 100-listed GKN said on Friday that it had agreed to combine its Driveline division with the Ohio-based maker of axles and driveshafts in a deal that gives GKN shareholders a 47.25 percent stake in the enlarged, US -listed group.
Under the revised offer, GKN investors would receive 81 pence in cash for each GKN share plus 1.69 new Melrose shares.
GKN argues its strategy offers investors superior value, at a time when regulators and MPs take a keen interest in what the Melrose offer might mean for GKN and its employees.
"Shareholders should be aware that Melrose is asking them to accept its acquisition paper at 22x 2017 earnings, in exchange for world class businesses which Melrose's offer only values at 14x 2017 earnings".
That will include considering whether they want to hold a stake in New York-listed Dana or London-listed Melrose. "Shareholders are advised not to sign any document which Melrose or its advisers send to them".
Its previous offer valued GKN at £7.4bn and included 57% of Melrose equity.
GKN shares rose almost 2% to 442p in early trading on Monday.
"Instead of £1.4 billion in cash and a majority investment in a stronger combined Melrose / GKN business, it appears the GKN Board prefers a minority stake in a foreign business (Dana) with no GKN management involvement".
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