GKN agrees £4.4bn deal to merge automotive arm with US counterpart

Engineering giant GKN has agreed to sell its automotive division to US company Dana in a deal worth £4.4bn.

The deal, announced less than a week after the Redditch-based group revealed it was in talks to dispose of the Driveline operation, could put the skids under a £7.4bn hostile takeover from turnaround specialist Melrose.

GKN revealed last week that it was in talks with Dana over the possible acquisition of its Driveline business, which supplies all-wheel-drive systems to many of the leading automotive OEMs.

The Driveline operation, which has a large operation in Erdington, is also working on the development of electronic axles.

Just days ago, Driveline workers at Erdington were joined by union colleagues from Jaguar Land Rover and other motor manufacturers to protest against the proposed takeover by Melrose, which workers claimed threatened to undermine their pensions and cast fresh doubt over the future of their jobs.

GKN said there was a compelling strategic rationale for the Dana deal, which it said represented an acceleration of GKN’s strategy of separating its Aerospace and Driveline businesses, while also providing enhanced value to GKN’s shareholders.

It also brought together two highly complementary businesses and created a global leader in vehicle drive systems across all three key markets – light vehicle, commercial vehicle and off-highway.

Mike Turner, chairman of GKN, said: “This combination of GKN Driveline and Dana will create a US and UK led global market leader in vehicle drive systems. The synergies between these two businesses and our complementary product portfolios make this a great deal for GKN shareholders.

“Following the transaction, GKN shareholders will own 47% of a $14bn-revenue, global automotive group and will retain ownership of GKN’s outstanding remaining businesses.”

He added that GKN was continuing to pursue the sale of its non-core businesses including Powder Metallurgy and the board remained committed to delivering up to £2.5bn to shareholders – one of the cornerstones of its Project Boost restructuring strategy.

“The board believes that this strategy is far more attractive for GKN shareholders than the Melrose proposal which fundamentally undervalues GKN and therefore the board unanimously recommends that GKN shareholders reject the Melrose proposal and vote in favour of the proposed combination with Dana.”

James Kamsickas, President and CEO of Dana, said: “This transformative and strategic transaction solidifies Dana as a world leader in vehicle drive systems and establishes us a leading position in electric propulsion, which we see as the future of vehicle drivetrains.

“We have a long history of partnering with GKN, and the companies possess similar cultures and exceptionally talented people.

“Our highly complementary businesses share a deep understanding of our customers’ long-term requirements. We look forward to delivering value and growth to our shareholders.”

Melrose has yet to comment, although its share price rose more than 3% on the announcement of the deal.