GKN rejects second takeover bid as battle heats up
GKN has rejected a second takeover bid from Melrose, despite the offer being upped to £7.4bn.
Melrose had increased its unsolicited bid for GKN by £400m this morning after its initial offer was unanimously rejected and GKN’s share price surged.
The industrial investor had a 405p-per-share bid knocked back by the board of GKN on Friday, although that started a public battle for ownership that has attracted interest from other companies and speculators.
GKN’s share price has risen 34% in three days since the initial bid was revealed on Friday morning – to well above Melrose’s offer – and last night closed at 442p. The second offer, at 430p per share, valued GKN at £7.4bn.
Melrose chief executive Simon Peckham said: “Since our approach was announced, the Melrose share price has risen as the market digests the attractive opportunity our proposal represents. As a result the implied premium has grown from approximately 24% to approximately 32% since our approach.
“However, the real value uplift will come from merging the interests of the two sets of shareholders and creating a business valued at approximately £11 bn today.”
GKN’s board has reiterated its belief that Melrose’s offer “fundamentally undervalued” the business.
Anne Stevens, who was permanently appointed as GKN chief executive last week, said: “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.”
Separately the pension trustees at Redditch-based GKN have warned there is a pension deficit of more than £1bn.
The trustees issued a statement that said: “Any material change to the corporate and capital structure of GKN would lead the Trustees to reassess the strength of covenant going forward and determine appropriate funding plans based on that covenant and its associated level of risk.”
They could ask a new owner to put money in to reduce the deficit.
Earlier this week Melrose said it would be commencing a series of shareholder meetings to discuss its acquisition proposal and affirm why it is an appropriate suitor for the business.
In a presentation to the meetings, Melrose describes GKN’s current position as “an overly complex and under-managed organisation without focus” and one which needs “a fundamental change of culture and leadership”.
Christopher Miller, chairman of Melrose, added: “Like GKN, Melrose is a UK company operating internationally. Since formation we have generated a total net shareholder value increase of £4.9bn.
“We can reinvigorate their businesses and create positive outcomes for shareholders, employees and customers around the world.”
