GKN rejects Melrose’s hostile £7.4bn bid
GKN has rejected an increased £7.4bn offer from industrial turnaround specialist Melrose after the firm ramped up its hostile bid for the engineer.
Melrose today raised its offer to 430.1p per share following a meeting with the company’s shareholders this week. The increased offer is based on a rise in Melrose’s own share price, which closed at 234.3p yesterday.
GKN said the bid was “effectively unchanged” from Melrose’s unsolicited £7bn offer on Friday, which “fundamentally undervalued” the company.
Following its initial rejection on Friday, GKN said it would split its aerospace and automotive businesses to create value for shareholders.
The engineer’s chief executive Anne Stevens and finance director Jos Sclater are currently meeting with shareholders to fight their side.
“We believe GKN’s current owners should retain all the benefits of the clear upside potential in GKN, rather than handing almost half of this upside to Melrose and its shareholders,” Stevens said.
GKN also came under pressure this week by US activist hedge fund Elliott which has urged the company to talk with Melrose. Elliott owns a 1.7 per cent stake in the engineering giant, which manufactures parts for Boeing and Volkswagen.
Melrose is aiming to “re-energise and re-purpose” GKN’s operations to improve the company’s trading margin. It says the deal would deliver “significantly greater benefits to the shareholders of GKN than GKN could otherwise achieve on its own”.
Simon Peckham, chief executive of Melrose said: “The real value uplift will come from merging the interests of the two sets of shareholders and creating a business valued at approximately £11bn today, of which GKN holders will own the majority.”
He said Melrose is having discussions with shareholders about the potential for the enlarged business.
Yesterday, the trustees of GKN’s pension scheme warned any buyer of the firm would face a pension deficit of more than £1bn, but a spokesperson for Melrose said that figure was “entirely in line” with its reading.
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