The fight for GKN (GKN) has intensified after Melrose Industries (MRO) upped its scrip/cash offer, which would leave GKN shareholders with a 60 per cent stake in the combined business, up from 57 per cent in the previous bid.
The enhanced bid, or “final offer” according to Melrose management, is now pitched at 1.69 shares in the new group and 81p in cash. That's equivalent to 467p a share, including the final dividend of 6.2p a share announced on 27 February, an effective 43 per cent premium to GKN's share price before news of the approach emerged in January.
However, GKN has disputed Melrose's inclusion of the final dividend in the value of its offer, which it said related to the 2017 financial year and had already been earned by shareholders. Excluding that, the revised offer is actually worth 460.7p per GKN share, the board argued.
Melrose chairman Christopher Miller has been highly critical of recent moves by GKN to merge its Driveline automotive business with US peer Dana in a £4.4bn deal. Mr Miller believes the transaction represents a leap of faith, leaving GKN shareholders “with a minority stake in a foreign listed group run by a Dana management team based in Ohio”.
He was also critical of GKN management for pursuing a deal which would likely require “a forced sale of Dana shares” and would “leave behind a GKN Aerospace business burdened by a disproportionate, and very substantial, amount of gross pension liabilities, inappropriate for the size of the underlying business”. (The deal would result in the GKN group holding around two thirds of the group’s gross pension liabilities).
However, GKN said it had agreed a liability reduction and deficit elimination plan with the trustees of its UK pension schemes. This was expected to enable GKN Aerospace to operate with pension schemes that have been "right-sized" in proportion to its cash profits and without any UK pension deficit, management said.
