Economy

Melrose Urges GKN Investors To Reject Dana Deal For Its Buyout (ALLISS)

Melrose Urges GKN Investors To Reject Dana Deal For Its Buyout (ALLISS)

GKN and Dana Incorporated agreed a US$6.1 billion deal on Friday to merge GKN's automotive business with US-based Dana as the British firm looks to fend off a hostile bid from Melrose Industries.

The news comes as part of GKN's Project Boost - its plan to persuade investors not to back Melrose's £7.4 billion bid - saying a proposal to separate GKN Aerospace and GKN Driveline into two listed companies would instead be more beneficial.

"The total consideration is composed of $1.6 billion in cash proceeds to GKN plc, the assumption of approximately $1.0 billion of net pension liabilities, and 133 million new Dana plc shares issued to GKN's shareholders, valued at approximately $3.5 billion", the news release said.

GKN shares were up 0.6% to 424.1 pence at 1240 GMT in London while Melrose stock was flat at 216.1 pence.

Melrose's offer sparked a public debate with some worrying that Melrose would break up GKN to hike its value ahead of re-selling it within a few years. Based on Dana Inc's USD26.20 share price as of the market close Thursday, this is equivalent to a USD3.5 billion stake in the new firm. The board remains committed to delivering up to £2.5bn of cash returns to shareholders over the next three years.

"GKN is continuing to pursue the sale of its non-core businesses including Powder Metallurgy", Chairman Turner added. Its aerospace division has also attracted a number of suitors since January, but the GKN board decided their proposals undervalued the business and did not pursue them, the company added. The current closing date for acceptances is March 29.

GKN was left vulnerable to bid approaches after two profit warnings in October and November that were caused by problems at its US aerospace business and sent its share price tumbling.

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Dana President and CEO James Kamsickas speaks during the grand opening of the new Dana axle plant in Toledo on October 25, 2017.

The merger will require approval by GKN shareholders, who will now have to weigh it against the merits of a Melrose takeover.

"Today's announcement changes nothing and is a further admission of the management failure of GKN", Melrose Chairman Christopher Miller said.

The Dana deal is part of GKN's Project Boost - which the United Kingdom company hopes will dissuade shareholders from agreeing to the Melrose takeover.

However, Melrose argued that many GKN investors would neither wish nor be able to hold USA stock.

Separately, the trustees of GKN's group pension said the arrangements agreed as part of the Driveline transaction provide "appropriate mitigation to the schemes". GKN is working with JP Morgan, Gleacher Shacklock and UBS.


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