Melrose 'final offer' for GKN

Casey Dawson
March 15, 2018

Melrose has increased its hostile bid for GKN and told shareholders in the United Kingdom engineering firm that it will be its "final offer".

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".

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".

GKN's board unanimously rejected the new bid on Monday saying it continued to fundamentally undervalue the company. It has offered to give back £2.5bn to shareholders and agreed to merge its auto unit with U.S. company Dana. Under the prior deal Melrose offered 1.49 Melrose shares in addition to the 81 pence in cash and dividend entitlement.

In addition, the group is now offering 467 pence a share, as well as offering to give shareholders £1.4 billion in cash. "Your board has unequivocally declined each time to enter into any such discussions".

GKN shareholders have until March 29 to decide whether or not to accept the offer.

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Melrose responded by taking its offer directly to GKN investors, ramping up the pressure on GKN's newly appointed chief executive, Anne Stevens. "Shareholders are advised not to sign any document which Melrose or its advisers send to them".

He added: "Melrose is not the right owner of GKN". Melrose's previous offer valued the engineering group at £7.3 billion.

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.

GKN shares rose almost 2% to 442p in early trading on Monday.

GKN's chairman, Mike Turner, wrote to investors on Monday to point out that Melrose "lacks experience in several critical areas and that its priorities are inappropriate for running a global technology-based business like GKN".

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