Hopes raised for GKN as new £8.1bn takeover bid fails to impress the City

THE future of engineering giant GKN looked more promising yesterday after investors reacted negatively to a new £8.1billion hostile takeover bid.

The increased offer from turnaround specialists Melrose – up from £7.1billion in January – sent both firms’ share prices falling. If the City expected the takeover to go ahead, then shares in GKN should have risen.

Rebecca O’Keeffe, head of investment at Interactive Investor, said: ‘The muted market reaction of the GKN share price to the increased offer by Melrose is the strongest indication yet that Melrose might not get its way.’

Pension trustees also intervened, saying GKN’s plans to get rid of its £675million pension deficit were in the best interests of its 32,000 members – and not a deal with Melrose. GKN is a 259-year-old engineering business that makes parts for planes, cars and fighter jets, with clients including Toyota, Airbus and the UK and US armies. The hostile takeover battle began in January when Melrose made its £7.1billion offer. The GKN board rejected this as cheap and opportunistic.

Melrose’s strategy is to sell firms on within three to five years – putting the long-term future of firms it owns at risk. Sixteen MPs have called on Business Secretary Greg Clark to block the bid.

GKN shareholders have until March 29 to accept or reject the £8.1billion offer.

Mike Turner, the firm’s chairman, said: ‘The board believes Melrose’s revised offer continues to fundamentally undervalue GKN and has no hesitation in unanimously rejecting it.’

Howard Wheeldon, an industry analyst, said: ‘I remain in little doubt that GKN retains the upper hand in the unfortunate and opportunistic hostile bid situation that it faces.’

Last week GKN announced it was selling its automotive arm to US ally Dana for around £4.4billion. Bosses believe this will better protect jobs and pensions than a Melrose bid for the whole firm.