Published: Thu, March 15, 2018
World Media | By Shelia Harmon

Melrose increases GKN hostile takeover bid to £8.1bn

Melrose increases GKN hostile takeover bid to £8.1bn

Just hours after turnaround specialist Melrose increased its hostile bid for GKN to £8.1bn, it has now emerged that the United Kingdom engineering giant has rejected the new bid saying the revised offer "continues to fundamentally undervalue GKN".

Melrose is now offering 467p per share, and has also raised the amount GKN shareholders will own from 57% to 60%.

In a notice to shareholders, it said that "the board continues to view the offer as entirely opportunistic and believes that its terms fundamentally undervalue GKN and its prospects". The move came after the blue-chip company agreed a deal last week to merge its automotive division with Dana.

Melrose said investors in GKN would under its new offer receive 81 pence in cash for every GKN share they hold, plus 1.69 new Melrose shares, keeping the cash part of the deal the same but upping the equity part from 1.49 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.

Melrose noted that its new offer represents a 43% premium to the 326.3 pence closing price of GKN on January 5, the day before its initial approach to GKN was announced. Under the prior deal Melrose offered 1.49 Melrose shares in addition to the 81 pence in cash and dividend entitlement.

GKN shareholders have until March 29 to decide whether or not to accept the offer. It also forces GKN shareholders to accept shares in a USA firm which many would not be able to hold, and they also would have to pay tax on those Dana shares. "Shareholders are advised not to sign any document which Melrose or its advisers send to them". Melrose's previous offer valued the engineering group at £7.3 billion.

"A hasty sale of one of Britain's most important businesses will leave it listed overseas, run by a foreign management team and rebranded as a US business", Melrose Chairman Christopher Miller said.

"We are more convinced than ever that the Melrose team, who have decades of experience in successfully transforming businesses, are the only real choice of team to re-energise and re-focus GKN to unlock its full potential", Melrose said in its statement.

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