Economy

GKN rejects Melrose's $10.2 billion offer

GKN rejects Melrose's $10.2 billion offer

Melrose Industries PLC (MRO.L) announced the terms of its firm offer to acquire the entire issued and to be issued share capital of GKN plc.

On Wednesday, Melrose made a firm, higher cash-and-stock offer valuing each GKN share at 430.1 pence, based on Melrose's closing price of 234.3 pence per share on January 16.

"We believe GKN's current owners should retain all the benefits of the clear upside potential in GKN, rather than handing nearly half of this upside to Melrose and its shareholders", GKN CEO Anne Stevens said.

Last week, GKN rebuffed an initial £7bn bid from Melrose because it "fundamentally undervalued" it.

"We are having discussions with shareholders about the potential for the merged business, which will be one of the largest companies in the United Kingdom".

Melrose, which specialises in buying companies and turning them around, said it expected to "re-energise and repurpose GKN's operations".

Melrose has been seen as an aggressive hostile suitor, with its round of shareholder meetings this week a tactical move to ramp up its efforts to secure backing. Melrose's share price meanwhile stands 2.30 percent lower at 228.90p.

GKN, whose roots date back to the 18th century, makes parts for the Boeing 737 jet, Black Hawk helicopter and components for Volkswagen and Ford cars. GKN is now valued at 7.6 billion pounds.

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"It's the same terms". The shares were trading about 0.5 percent higher earlier in the session. "I'm a bit surprised Melrose are as aggressive as they are but I think they have a good case".

However the firm also came under pressure by USA activist hedge fund Elliott which has urged GKN to talk with Melrose.

Melrose has claimed that GKN is an "under-managed organisation without focus" with sub-par shareholder returns, but offers "huge scope for improvement".

A London-based event-driven hedge fund manager betting on a potential GKN transaction with Melrose told Reuters that hedge funds that bet on deals were "all over" the trade.

USA activist investor Elliott Advisors has urged GKN to talk with Melrose after the company rebuffed a 405 pence per share cash-and-stock offer this month. Since then shares have risen by about a third to trade above the offer price.

Melrose chief executive Simon Peckham said in a statement: "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".

The Melrose spokeswoman said the trustees' figures on GKN's pension exposure were in line with Melrose's own readings.

Rothschild, RBC Europe and Investec are advising Melrose, while GKN is working with Gleacher Shacklock, JPMorgan Cazenove and UBS.


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