Engineering business GKN (GKN) has been forced into an embarrassing climbdown in its battle to fend off a hostile bid from industrial buyout specialist Melrose (MRS).
Comments from senior management in the weekend press citing shareholder support have had to be retracted as they were not verified.
A Sunday Telegraph article contained the following from Anne Stevens, chief executive, ‘Stevens says ? she's convinced investors will back [GKN]’.
A Sunday Times article contained a comment by Jos Sclater, finance director, that ‘long-only shareholders are mostly supportive of existing management, and understand that the Dana deal and becoming a pure play aerospace company has, longer term, significantly more value than the Melrose bid’.
This somewhat overshadows the news that US-based Dana has increased its offer for GKN’s Driveline business by £100m.
WHAT'S AT STAKE ON THURSDAY?
The crunch shareholder vote on the Melrose deal comes this Thursday (29 Mar).
AJ Bell investment director Russ Mould thinks recent share price action is pointing towards acceptance of the Melrose bid - with the discount to the price implied by the cash and shares offer closing.
Shareholders have until 1pm on Thursday 29 March to express their views and they have a choice between accepting a takeover offer from GKN or approving a partial merger with Dana.
GKN has offered to break itself up, merging its Driveline business with America's Dana, keeping aerospace and selling off other assets.
Shareholders would keep 100% of GKN’s aerospace business, 47.25% of the enlarged auto parts operation (which would have a UK listing) and potentially share £2.5bn in cash returns from GKN after any disposals and the Dana deal.
The car parts merger with Dana is aiming for completion in the fourth quarter of 2018, pending shareholder approval, anti-trust approval from the competition authorities and the failure of the Melrose bid. There is also a proposed solution for the pension deficit.
Melrose has offered 81p in cash plus 1.69 Melrose shares for each GKN share. That c£8bn offer gives GKN investors £1.4bn in cash up front and a 60% stake in the enlarged Melrose business. There is also a proposed solution for the pension deficit.
