Britain's GKN signs deal with Dana over auto tie-up


"We urge GKN shareholders to accept the Melrose offer". GKN's board added that the proposed deal, along with its vision for GKN Aerospace, was a superior prospect for shareholders than an offer tabled by Melrose Industries.

Earlier on Friday, Melrose reported 5.8% shareholders of GKN PLC have so far approved its hostile GBP7.4 billion takeover bid.

However, the Melrose offer "fundamentally undervalues GKN", according to GKN's board, which has rejected the approach. The current closing date for acceptances is March 29.

Shares in GKN closed 3.3% higher at 435.10 pence on Friday, Melrose closed 4.0% higher at 224.70p.

The proposed deal gives GKN Driveline a total enterprise value of $6.1 billion, equal to a 2017 enterprise value to core earnings multiple of 7.5 times.

GKN was left vulnerable to bid approaches after two profit warnings in October and November that were caused by problems at its USA aerospace business and sent its share price tumbling.

In January, GKN announced that it meant to separate its aerospace and automotive businesses and confirmed on 27 February that it meant to complete a demerger by mid-2019.

The combined company will be domiciled in the United Kingdom as Dana plc and will continue to trade on the New York Stock Exchange under the ticker symbol DAN.

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Dana President and CEO James Kamsickas speaks during the grand opening of the new Dana axle plant in Toledo on October 25, 2017.

GKN shareholders will need to approve the merger, which means they will have to weigh its merits against a Melrose deal.

"A hasty sale of one of Britain’s most important businesses will leave it listed overseas, run by a foreign management team and rebranded as a US business", Melrose Chairman Christopher Miller said.

"Following the transaction, GKN shareholders will own 47 per cent of a $14bn revenue, global automotive group and will retain ownership of GKN's outstanding remaining businesses".

Melrose argued, however, that the deal would result in a majority owned and managed USA business.

Separately, the trustees of GKN's group pension said the arrangements agreed as part of the Driveline transaction provide "appropriate mitigation to the schemes".

Macfarlanes London corporate partners Graham Gibb and Richard Burrows are advising Dana.