Britain's GKN rejects Melrose $11.2 billion final offer

GKN has struck a $6.1 billion deal to merge its automotive business with USA company Dana Incorporated (DAN.N) in a move by the British engineer to fend off a hostile takeover by turnaround specialist Melrose Industries.

Melrose has increased how much GKN shareholders will own in Melrose after the deal by three percent - from 57 percent to 60 percent.

In a message to GKN shareholders, Melrose said the GKN board, in hiving off its automotive division to Dana, "is attempting a hasty fire-sale of GKN businesses before they have been given a chance to reach their potential and with damaging consequences, we believe, for all stakeholders".

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".

FTSE 100-listed GKN said on Friday that it had agreed to combine its Driveline division with the Ohio-based maker of axles and driveshafts in a deal that gives GKN shareholders a 47.25 percent stake in the enlarged, USA -listed group.

In an open letter to GKN shareholders, Melrose said the Dana deal is floored as many investors won't be able to hold the shares being offered by Dana as part of the deal. Under the prior deal Melrose offered 1.49 Melrose shares in addition to the 81 pence in cash and dividend entitlement.

The FTSE 100 group's investors have until 13:00 GMT on March 29 to accept the current offer, which, Melrose noted, "will not be increased under any circumstances".

Melrose has kept the cash part of the deal the same but raised the equity part from 1.49 new Melrose shares. GKN shareholders will need to approve the merger, which means they will have to weigh its merits against a Melrose deal. It also forces GKN shareholders to accept shares in a U.S. firm which many would not be able to hold, and they also would have to pay tax on those Dana shares. Melrose's previous offer valued the engineering group at £7.3 billion.

Melrose is not the right owner of GKN.

Shares in Melrose were down 4.9 per cent at the time of writing, while GKN's stock was down more than two per cent.

It is not following up on any proposals because management remains focused on turning the business around, it said.


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