£4bn merger to save GKN jobs
Engineer to split off car arm to scupper Melrose
ENGINEERING giant GKN is days away from merging its automotive arm with a US ally in an eleventh-hour bid to fend off a hostile takeover.
The car and aeroplane parts maker is in talks with US car partsmaker Dana over a merger of Driveline, which accounts for more than half its £10bn sales. Based on Melrose bid, this values the car arm at around £4bn.
Bosses believe a tie-up could be better for shareholders than the £7.4bn offer tabled for the whole firm by City predator Melrose Industries.
The dramatic twist in the bitter battle comes amid signs that some major shareholders could get behind Melrose, particularly if it comes back with a higher offer.
GKN is expected to try to get a deal with Dana on the table by next week, ahead of Melrose shareholders voting on the takeover on Thursday.
GKN bosses are expected to push Dana for a very high premium for shareholders as well as a contribution to the pension scheme, which has a £700m deficit. It had announced plans to split its car and aeroplane divisions in a demerger, as part of a major turnaround, and yesterday said it would put £160m into the pension pot.
GKN also plans to sell its powder metallurgy business, unlocking more money.
If the Dana deal goes through the 259year-old firm, vulnerable to takeover after disappointing shareholders due to missed targets, would be a standalone aerospace business serving clients such as Boeing. Bosses said there was no certainty of a deal with Dana.
GKN Driveline employs about 26,000 people around the world, with 850 in Birmingham. It makes parts such as drive-shafts for more than 90pc of the world’s car makers, including Toyota and Mercedes, with more than £5bn sales last year. It also has leading electric vehicle technology.
Dana is strong in SUVs and trucks and has slightly smaller sales, with major clients including Ford, Fiat Chrysler and Renault Nissan. Details of any deal have not been disclosed.
Melrose, run by David Roper, 67, Christopher Miller, 66, and Simon Peckham, 55, aims to sell firms on after three to five years of ownership. There are fears this approach threatens GKN’s relationship with customers who want long-term partners.
Bosses from GKN and Melrose as well as Unite union are set to appear before the business, energy and industrial strategy committee on Tuesday to explain plans for the business.
It is understood the Ministry of Defence has spoken to Melrose about its plans.
The UK Government is not expected to intervene in a sale of the car arm to the US. A Melrose spokesman said: ‘Melrose stands ready to provide the better option for shareholders and UK.’