Special relations
GKN’S £4.4bn plan to merge with US rival
GKN has revealed a £4.4bn plan to merge its Driveline automotive business with Dana, its US rival, throwing into doubt a £7.4bn hostile takeover bid from Melrose.
The Dana deal – which needs to be voted on by GKN shareholders – will bring together two businesses that produce drive-train parts such as axles for vehicles, along with systems for electric vehicles.
Under the terms of the cash and shares proposal, GKN will hold 47.25pc of the merged business and Dana the remainder.
Based on Dana’s share price on March 8, the deal is worth a total of £4.4bn, and the company will issue $3.5bn (£2.5bn) in new shares to support it. As well as the £2.5bn from Dana shares, GKN will also receive £1.2bn in cash and Dana will take on £700m of GKN’S pension scheme.
If the merger goes ahead, it is expected to deliver £170m of savings by the third year. Mike Turner, GKN chairman, said the tie-up would create a global leader in vehicle drive trains, with GKN shareholders owning almost half of an automotive business with $14bn in annual revenues.
“The synergies between these two businesses and our complementary product portfolios make this a great deal for GKN shareholders,” he added.
James Kamsickas, the Dana chief executive, described the deal as a “transformative and strategic” move. He said: “It solidifies Dana as a world leader in vehicle drive systems and establishes a leading position in electric propulsion, which we see as the future of vehicle drivetrains.” The combined business would be led by Mr Kamsickas and Dana’s finance director, and two new board positions would be added which would be filled by appointments made by GKN. The company would retain a New York listing but be domiciled in the UK.
GKN, the FTSE 100 automotive and aerospace parts manufacturer, is currently fighting of a hostile bid from turnaround investor Melrose. News of the £7.4bn cash-and-paper bid, which would leave GKN investors with 57pc of the combined company, sent GKN shares surging by 30pc in January.
FTSE 250 firm Melrose, which says it “buys, improves and sells” failing companies, claims GKN has failed to deliver on profits and it could boost returns to shareholders by taking control.
There have been claims that Melrose does not have the experience to handle such a large business and its sensitive defence contracts, and that it would cut jobs to make efficiencies.
GKN management, led by Anne Stevens, has revealed its own “Project Boost” plan to get the company back into shape, including splitting the business up. The massive pension scheme at GKN – which has a £1.1bn deficit – has also been a focal point, with fears over how it could be supported under a different regime.
Because of GKN work’s on defence contracts, national security has also been a factor in some concerns about the takeover.
MPS have also questioned whether letting Melrose take control – with its plans to ultimately sell the business – could harm Britain’s industrial footprint, with fears the UK could lose a world-leading business.