GKN board rejects revised £8.1bn Melrose offer
GKN has rejected an increased offer for its business from turnaround specialist Melrose, saying the new offer of £8.1bn still fundamentally undervalues the company.
In a statement to its shareholders, GKN said the Melrose bid did not reflect the value of its world class Aerospace business, which GKN expects to be a significant income generator moving forward.
Under the terms of its strategic review, dubbed Project Boost, GKN proposes splitting off its Drive and Aerospace divisions into two separate companies.
On Friday (March 9) it revealed it had concluded a £4.4bn deal to combine the Driveline business with US-based Dana.
GKN said the Melrose approach did not reflect the benefits of the Dana deal, which it said brought together two highly complementary businesses with considerable synergies to create a global leader in driveline.
Under the deal, GKN shareholders will own 47.25% of this new combined company and GKN will receive cash proceeds, net of pension transfers, of £1.2bn.
The GKN board said the deal was on highly attractive terms for its shareholders.
It also said the Melrose offer did not reflect the return of up to £2.5bn in cash to GKN’s shareholders over the next three years, as the Redditch group was proposing.
GKN has also queries the value of Melrose’s latest offer.
It said the revised offer was not 467p per share, as Melrose claimed, but actually, 445.5p.
It said Melrose was including GKN’s announced dividend in its offer.
GKN also revealed that since announcing its intention to separate its Aerospace and Driveline businesses, it had received a number of approaches for GKN Aerospace at values significantly above what it believed was reflected in GKN’s closing share price.
It also accused Melrose of misleading GKN pensioners. It said Melrose had made a number of misleading statements regarding GKN Aerospace’s future exposure to pension liabilities.
“Unlike Melrose, GKN has agreed a liability reduction and deficit elimination plan with the trustees of GKN’s UK pension schemes. Once implemented, this plan is expected to enable GKN Aerospace to operate with pension schemes that have been right-sized in proportion to its EBITDA and without any UK pension deficit,” it said.
Mike Turner, chairman of GKN, said: “The board believes that Melrose’s revised offer continues to fundamentally undervalue GKN and has no hesitation in unanimously rejecting it.
“Shareholders should be aware that Melrose is asking them to accept its acquisition paper at 22x 2017 earnings, in exchange for world class businesses which Melrose’s offer only values at 14x 2017 earnings.
“Melrose is not the right owner of GKN. Its management lacks relevant experience and its short-term business model is inappropriate for GKN’s customers and its investors. Winning new business in our markets would be more difficult if customers were uncertain as to the identity of their future long-term partners.”