You are here: Home » Reuters » News
Business Standard

Britain's Melrose raises GKN bid to $11.2 billion in final offer

Reuters  |  LONDON 

By and Ben Martin

LONDON (Reuters) - Industries increased its hostile offer for by around 10 percent to 8.1 billion pounds ($11.2 billion), trying to win over investors after the British engineering firm struck a rival deal of its own last week.

GKN's board unanimously rejected the new bid on Monday saying it continued to fundamentally undervalue the company.

But declared its sweetened offer as "final", meaning it cannot improve the terms further under British takeover rules. As a result, shareholders must choose between the bid and the engineer's own turnaround plan.

Under the revised offer, investors would receive 81 pence in cash for each share plus 1.69 new shares. The previous offer made in January was 1.49 new shares plus 81 pence cash.

shares fell 2.2 percent to 425.5 pence by 1556 GMT, compared to the 467 pence per share initial value of Melrose's final offer.

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, which makes parts for companies and aircraft manufacturers, cited the impact of Melrose's share price fall on the value of the bid as a reason for spurning the offer.

However, Investors, which holds stakes in both companies, said shareholders should back Melrose's sweetened bid.

"We believe the interests of shareholders in both companies are best served by accepting Melrose's raised bid," David Cumming, Investors' for equities, said.

The asset management arm of owns almost 1.2 percent of and 5.4 percent of

As part of its defence, struck a $6.1 billion deal on Friday to merge its automotive business with U.S. company Dana Incorporated, offering shareholders a 47.25 percent stake in the enlarged, U.S.-listed group.

has also pledged to return 2.5 billion pounds to investors in the next three years following the Dana deal and an earlier pledge to sell its powder metallurgy business.

The engineering group said on Monday it believed it would be worth 503 pence a share given its plans for improving the company.

But Aviva's Cumming described GKN's plan as a "reactive review of its business structure" and said Investors favoured Melrose's "proposed measured execution of value."

A hedge fund investor, who has built a stake in since the engineering company disclosed Melrose's bid in January, also said the new offer was high enough for to win.

"It was a little bit better than we thought," he told

argued on Monday that GKN's Dana deal was "ill-thought-through" and would face regulatory hurdles.


said in its latest defence, also published on Monday, that shareholders would be invested in a more profitable following the sale of Driveline and powder metallurgy, plus have holdings in the merged GKN-Dana company.

The engineering firm, which can trace its roots back to 1759, is attractive to buyers because of its involvement with growing aircraft programmes such as the and the A320, and in cars, where it has been growing market share and including and

But it was left vulnerable to predators after two profit warnings late last year, caused by problems at its U.S. business.

Melrose's potential takeover of has prompted worries from British politicians about UK jobs being lost and the country's engineering know-how ending up in foreign hands.

employs around 6,000 people in Britain -- about 10 percent of its workforce.

Politicians were also concerned that could break up and sell parts to foreign buyers, potentially compromising British and U.S. national security because of GKN's work on defence programmes -- the company makes components for the combat jet.

told lawmakers earlier in March that it would consider making binding commitments about the future of should its bid succeed.

The deadline for shareholders to accept Melrose's offer is March 29.

($1 = 0.7213 pounds)

(Editing by Kate Holton, Keith Weir and Jane Merriman)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Mon, March 12 2018. 22:55 IST