GKN upps the stakes in battle to thwart Melrose

Engineering group GKN has upped the stakes in its battle to fend off an unwarranted approach from turnaround specialist Melrose by saying it will demonstrate why the business is best retained under its current ownership.

Melrose has currently bid £7.4bn for the group and submitted the offer to shareholders.

It believes it can secure added value to the business by splitting off the automotive and aerospace arms of the group into separate companies.

Redditch-based GKN has said it considered Melrose’s offer to be entirely opportunistic and that the terms fundamentally undervalue GKN and its prospects.

In a statement to the markets, it said: “The board intends to demonstrate over the coming weeks why its vision for the future of GKN, which is informed by real industry expertise, offers greater value and certainty than Melrose’s offer.

“The board unanimously recommends that GKN shareholders reject Melrose’s offer and take no action.”

It has also sought to clarify to shareholders the timetable surrounding US regulatory clearance of offer.

It said: “GKN continues to believe that the offer made by Melrose is derisory and that GKN has a far better strategy and detailed operating plan, informed by real industry expertise, to deliver shareholder value.

“GKN believes that the CFIUS (Committee on Foreign Investment in the United States) process is likely to take substantially longer than the City Code offer timetable, based on specialist US legal advice.

“GKN firmly believes that shareholders should be allowed to make a fully informed decision and not be placed in a position where they have to form a final view on the offer while there remains uncertainty about the timetable and the outcome of a matter as material as the CFIUS process.”

In order to avoid this possibility, the GKN board said it was prepared to consider granting an extension to the City Code timetable to enable the CFIUS process to conclude before shareholders were required to make their minds up about the Melrose offer.

“Given the importance of GKN’s defence businesses, the board is firmly of the view that it would not be in shareholders’ interests for there to be uncertainty about the CFIUS Approval, its timing or any conditions which might be attached to it as the offer timetable draws to a close,” it added.

Responding, Melrose said it continued to work diligently with the relevant regulatory authorities to ensure all the necessary filings were made and the approvals obtained as quickly as possible.

“Melrose continues to believe that it will be able to obtain the relevant clearances within the parameters permitted by the City Code timetable,” it said.

“However, it welcomes the flexibility from GKN regarding a possible extension to the City Code timetable, if required, and Melrose now looks forward to GKN’s timely cooperation with the relevant regulators.

“Melrose remains committed to completing the acquisition as soon as possible.”