GKN Defends Post-Dana Deal Pension Finance Plan From Melrose Criticism

20th Mar 2018 08:55

LONDON (Alliance News) - GKN PLC said Tuesday it had a "clear and comprehensive" plan to eliminate its pension deficit as it continues to attempt to fend off a hostile GBP8.4 billion takeover from Melrose Industries PLC through a deal with New York-listed engineering firm Dana Inc.

GKN argued that Melrose's comments on Monday were "misleading as to the true status of GKN's pension obligations post the combination of our Driveline business with Dana".

On Monday, Melrose argued the remaining aerospace-focused GKN business would be overburdened with up to GBP3 billion of pension liabilities upon the planned disposal of its Driveline and - eventually - powder metallurgy units.

Earlier in March, GKN reached an agreement to combine its automotive Driveline business with New York-listed engineering firm Dana Inc in a USD6.1 billion cash-and-shares deal. Under the deal, GKN shareholders will receive 47.3% of the share capital of the newly-formed combined firm Dana PLC - listed in New York and London - after completion.

As part of the deal, GBP1.38 billion of GKN's pension scheme liabilities and GBP818 million of its deficit will be transferred to Dana PLC.

GKN has also agreed with its pension trustees, it added, to reduce its remaining gross liabilities to below GBP2.00 billion and eliminate the deficit.

"GKN has a clear and comprehensive plan to reduce its pension liabilities and eliminate the deficit in its UK pension schemes," GKN Finance Director Jos Sclater said. "We have a binding agreement with the Trustees which works for all stakeholders: the scheme members, the Trustees and the company and its shareholders."

"A month ago," Sclater added, "Melrose appeared to suggest that its plan to pay GBP150 million into the pension scheme was sufficient. Now it appears to have unveiled a GBP1 billion plan that would achieve less than GKN's own agreement with the Trustees, at a greater cash cost which would erode shareholder value. I think our shareholders deserve better."

Separately Tuesday, one of GKN's largest shareholders has publicly declared it will reject Melrose Industries PLC's hostile takeover offer for the company, the Times reported.

Columbia Threadneedle, which owns a 3.4% stake in engineer GKN, has said it will vote in favour of the existing GKN management, the newspaper said.

GKN has been fighting off the bid from Melrose since January, and GKN shareholders have until Thursday next week to declare who they are backing.

Columbia Threadneedle is the third largest shareholder in the company, the Times said, and is the biggest so far to make known its position publicly.

Shares in GKN were 1.1% lower at 419.60 pence on Tuesday.

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