UPDATE: GKN Rejects Raised Final Offer From Melrose Industries (ALLISS)

12th Mar 2018 15:51

LONDON (Alliance News) - Engineering firm GKN PLC on Monday rejected Melrose Industries PLC's improved, and final, offer for the company, saying it continues to undervalue the company.

Melrose earlier on Monday boosted its offer to buy FTSE 100-listed GKN to GBP8.1 billion in cash and shares from the initial GBP7.4 million bid in January, saying the new offer was final.

Melrose - a FTSE 250-listed industrial turnaround firm - increased its bid to 1.69 Melrose shares for every GKN share held, plus an unchanged 81.00 pence in cash, together equivalent to 467.00p per share based on Melrose's share price at the close on Friday. Shareholders also would be entitled to receive the 6.20p final GKN dividend.

Melrose had said its new offer represented a 43% premium to the 326.30p GKN closing price on January 5, the day before its initial approach to GKN was announced.

As part of its new, final offer, Melrose only increased the share element of its deal. Under the prior deal Melrose offered 1.49 Melrose shares in addition to the 81.00 pence in cash and dividend entitlement.

Earlier Monday, GKN had said it "evaluating" the revised Melrose offer. However later in the day, GKN said the offer "continues to fundamentally undervalue GKN", and does not reflect its "world class" Aerospace business nor the benefits of combining GKN's Driveline business and Dana Inc, amongst other things.

GKN refuted the 467.00p per share value of the offer, saying it is actually 460.70p. The dividend included in Melrose's offer, it said, has already been earned by GKN shareholders. Further, at Melrose's midday Monday price of 215.70p, the revised offer was only worth 445.50p.

The increased bid followed the announcement on Friday that GKN had reached an agreement to combine its automotive Driveline business with New York-listed engineering firm Dana in a USD6.1 billion cash-and-shares deal.

GKN Chairman Mike Turner 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."

He added: "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."

GKN shares were down 2.7% on Monday afternoon at 423.50p, and Melrose shares were down 5.5% at 212.50p.

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Related Shares:

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