Response to Offer

GKN PLC - Response to Offer

PR Newswire

London, February 1

LEI: 213800QNZ22GS95OSW84

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.

1 February 2018

GKN plc (“GKN” or the “Company”)

Statement regarding offer

GKN notes the publication today of a letter from the Chairman of Melrose Industries PLC (“Melrose”) to GKN’s shareholders announcing the posting of an offer document containing the full terms and conditions of its unsolicited offer to acquire the entire issued and to be issued share capital of GKN for 1.49 new Melrose shares and 81 pence in cash per share (the “Offer”), which follows Melrose’s announcement on 17 January 2018 pursuant to Rule 2.7 of the City Code on Takeovers and Mergers (the “Code”).

The terms of the Offer are unchanged from those contained in Melrose’s announcement of 17 January 2018. The Board of GKN (the “Board”) continues to view the Offer as entirely opportunistic and believes that its terms fundamentally undervalue GKN and its prospects. In particular, the Board believes that:

GKN has strong businesses which offer considerable upside potential – by rejecting the Offer, shareholders will see 100% of the value created; with Melrose they will lose over 40% of this upside.

GKN has a new leadership team and strategy to deliver a step-change in profit margins and cash generation, specifically through GKN’s transformation plan ‘Project Boost’, focusing on the 4Ps of pricing, procurement, process and productivity, as well as fixed costs and capital allocation.

Melrose’s stated premium of approximately 28% over the closing share price of GKN on 5 January 2018 is a fake premium and is misleading. Melrose is proposing to fund over 80% of the offer consideration in shares and GKN’s shareholders are themselves funding the majority of the premium. In addition, GKN’s strong balance sheet is effectively funding the vast majority of the 81 pence per share in cash.

Melrose is not the right owner for GKN. It lacks experience in relevant high technology businesses and of investing for the long-term.GKN is a much larger and more complex business than anything acquired by Melrose in the past. In addition, Melrose has very limited experience at Board level of managing Tier 1 Aerospace and Automotive suppliers.

The Board will be writing to shareholders in accordance with the Code within the next 14 days with its formal response to the Offer, which will explain in detail its reasons for recommending that shareholders reject the Offer.

The Board unanimously recommends that GKN shareholders reject the Offer and take no action.

Anne Stevens, Chief Executive, GKN, said:

“This Offer is derisory. Melrose is trying to buy GKN on the cheap and with GKN’s own money, just at the point when our company is beginning to reap the benefits of its long-term investments.

“GKN’s new leadership team is committed to maximising shareholder value. We are excited about presenting ‘Project Boost’ and our wider transformation plan to shareholders in the next two weeks. We will show how we expect to deliver a step-change in operational performance and financial returns, based on real engineering not financial engineering. We remain committed to separation at the right time.

“GKN’s shareholders should retain 100% of these benefits, rather than handing almost half of them to Melrose’s management and shareholders.”

Contacts:

GKN plc

Guy Stainer, Investor Relations Director

Tel: +44 (0)20 7463 2382

FTI Consulting

Andrew Lorenz / Richard Mountain

Tel: +44 (0)203 727 1340

Gleacher Shacklock (Financial Adviser to GKN plc)

Tim Shacklock, Dominic Lee, Tom Quinn

Tel: +44 (0)20 7484 1150

J.P. Morgan Cazenove (Financial Adviser and Corporate Broker to GKN plc)

Robert Constant, Dwayne Lysaght, Stephen Smith

Tel: +44 (0)20 7742 4000

UBS (Financial Adviser and Corporate Broker to GKN plc)

Hew Glyn Davies, James Robertson, Jonathan Retter

Tel: +44 (0)20 7567 8000

Sources and Bases

1. GKN’s undisturbed market capitalisation on 5 January of £5,604 million is calculated based on a share price of 326.3 pence per GKN share (being the closing price on 5 January 2018, the last business day before the approach made by Melrose to the GKN Board) and basic shares outstanding (excluding shares held in Treasury) of 1,717,572,609 as announced by GKN on 30 January 2018.

2. Melrose’s undisturbed market capitalisation on 5 January of £4,224 million is calculated based on a share price of 217.6 pence per Melrose share (being the closing price on 5 January 2018, the last business day before the approach made by Melrose to the GKN Board) and basic shares outstanding of 1,941,200,503 as announced by Melrose on 12 January 2018.

3. Based on an undisturbed market capitalisation of the enlarged group of £8,437 million, comprising GKN’s undisturbed market capitalisation of £5,604 million and Melrose’s undisturbed market capitalisation of £4,224 million, less the value of cash consideration to GKN shareholders of £1,391 million(4).

I. Based on an exchange ratio of 1.49 new Melrose shares per GKN share as announced by Melrose on 1 February 2018, GKN shareholders would own approximately 57% of the enlarged group. The total value of the enlarged group attributable to GKN shareholders would therefore be £4,798 million.

II. When the cash consideration of the offer is included with the above, the total offer value to GKN shareholders is £6,189 million.

III. Assuming 1,717,607,958 basic shares outstanding for GKN, the delivered price per GKN share is 360 pence. This is equivalent to a premium of approximately 10.4% to the closing price of 326.3 pence per GKN share on 5 January 2018.

4. Cash consideration to GKN shareholders is £1,391m based on 81 pence per share in cash (as announced by Melrose on 1 February 2018) and 1,717,572,609 basic shares outstanding (excluding shares held in Treasury) in GKN.

Further information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

Gleacher Shacklock LLP ("Gleacher Shacklock"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively as financial adviser to GKN and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than GKN for providing the protections afforded to clients of Gleacher Shacklock or for providing advice in connection with the subject matter of this announcement or any other matter referred to herein.

J.P. Morgan Securities plc (which conducts its UK investment banking business as J.P. Morgan Cazenove) ("J.P. Morgan Cazenove") is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom. J.P. Morgan Cazenove is acting exclusively as financial adviser to GKN and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters set out in this announcement and will not be responsible to anyone other than GKN for providing the protections afforded to clients of J.P. Morgan Cazenove or its affiliates, nor for providing advice in relation to any matter referred to herein.

UBS Limited ("UBS") is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom. UBS is acting exclusively as financial adviser to GKN and no one else for the purpose of the consideration of a proposed acquisition by Melrose and will not be responsible to anyone other than GKN for providing the protections offered to clients of UBS nor for providing advice in relation to the subject matter of this announcement or any transaction, arrangement or other matter referred to herein.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel’s website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel’s Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on a website

In accordance with Rule 26.1 of the Code, a copy of this announcement will be published on the GKN website (www.gkn.com) by no later than 12 noon on the business day following this announcement. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Cautionary Statement

This announcement contains forward looking statements which are made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward looking statement which could cause actual results to differ materially from those currently anticipated. Nothing in this document should be regarded as a profit forecast.