GKN confirms talks to sell off Driveline division
Midlands engineering group GKN has confirmed that it is talks to sells off its lucrative automotive division, Driveline.
The group was forced to make an announcement after reports emerged last night that the Redditch-based group was in talks with US-based Dana Incorporated.
The move could scupper attempts by Alcester-based Melrose to acquire GKN. The turnaround specialist has bid £7.4bn for the company – an offer which GKN has dismissed as seriously undervaluing the business.
In a statement to the markets, GKN said that following a decision to demerge its Driveline and Aerospace divisions – which it expected to compete by mid-2019, the company had received offers from around the world to acquire the operations.
“The company has received a number of approaches in respect of its businesses and the board confirms that it has engaged in discussions with Dana Incorporated regarding a potential combination of Dana with GKN Driveline that would be effected mainly in equity,” it said.
“The board of GKN considers that the company has world leading businesses that offer significant upside potential through the execution of Project Boost (the restructuring strategy which recommended the demerger).
“However, it believes that the possible transaction under discussion could provide greater value to shareholders and should therefore be explored alongside the demerger, as compared with the Melrose offer which has been rejected by the board as fundamentally undervaluing the company and its prospects.”
It said there could be no certainty that the discussions would lead to a deal being completed or as to the terms of any transaction.
“The company’s shareholders will be kept informed of any relevant developments and, in the meantime, are advised to take no action in relation to the Melrose offer,” it added.
Dana is a vast operation in its own right, specialising in driveline components and technologies. It has a vast network of nearly 100 engineering, manufacturing and distribution facilities in 34 countries on six continents. It has a turnover in excess of $7bn and employs more than 30,000 people.
In the UK, it has an axle division based in Witton, in Birmingham – ironically not far from GKN Driveline’s main base of operation.
The two companies have a history of collaboration. Twenty years ago they forged an alliance to design advanced driveline systems for all-wheel and four-wheel-drive passenger cars, light trucks and SUVs.
The emergence of the talks overshadowed news that the Mayor for The West Midlands, Andy Street had approached Business Secretary Greg Clark, asking him to consider halting the potential takeover of GKN by Driveline.
Mr Street said GKN was of strategic importance to the West Midlands economy, helping to support thousands of jobs.
In a letter to Mr Clark, Mr Street said: “Given the importance of GKN and of these takeover concerns, I call on you and your department to review the bid by Melrose Industries, and determine if Government should halt the takeover.”