GKN rejects £7.4bn hostile takeover bid from Melrose

● No real change from initial bid approach – GKN ● Melrose says new entiry would ‘re-energise’ target

Aerospace-to-automotive group GKN rejected a £7.4 billion takeover bid from Melrose Industries yesterday, branding it as “effectively unchanged” from last week’s initial rebuffed approach.

The bid values GKN shares at 430.1p, while turnaround specialist Melrose is also proposing to take on around £1bn of debt.

Melrose, which specialises in buying and revitalising manufacturers, claimed that a merger would “re-energise and re-purpose” GKN, creating a group worth £11bn.

The suitor added that the acquisition would give “significantly greater benefits to the shareholders of GKN than GKN could otherwise achieve on its own”.

Under the reverse takeover, GKN shareholders would own 57 per cent of the combined business, but the target company’s board said it was preferable that its shareholders “retain 100 per cent of the benefits” of the upside potential from a turnaround strategy.

GKN said that the terms of the unsolicited approach remain unchanged, with the bid only rising by 6.2 per cent as Melrose shares are now worth more having increased since the takeover interest first emerged.

Anne Stevens, who was appointed permanent chief executive of GKN last week, said: “We believe GKN’S current owners should retain all the benefits of the clear upside potential in GKN, rather than handing almost half of this upside to Melrose and its shareholders.

“We have already stated that the terms of Melrose’s offer fundamentally undervalue the company and we are actively engaging with shareholders to explain how our transformation plan will provide value.”

GKN, which makes wing tips for Airbus and parts for car giants including Mercedes and Jaguar Land Rover, advised shareholders to “take no action” and said it would elaborate soon on its turnaround plans for the business.

This includes a pledge to separate the automotive and aerospace divisions.

The hostile takeover offer comes after GKN ditched its incoming boss in November less than two months before he was due to take the top job as it warned over further problems at its troubled US plant.

The offer would see GKN shareholders get 1.49 Melrose shares and 81p in cash for each share held, and is 32 per cent above GKN’S closing price on 5 January, the last trading day before Melrose made its first takeover approach.