Melrose Industries has tabled a £7.4 billion hostile takeover bid for GKN in a move it claims would “re-energise and re-purpose” the embattled engineer.
Melrose, which specialises in buying and rejuvenating manufacturers, said the cash-and-stock offer values GKN shares at 430.1p each.
GKN shareholders would own around 57% of the combined group and would become “major participants in the potential future value creation in both the GKN and Melrose businesses”, it added.
The unsolicited takeover bid for one of Britain’s oldest companies comes after Melrose sought to woo GKN shareholders this week in an effort to garner support for a deal.
GKN’s shares have jumped since Melrose approached the group last week
GKN rejected an initial takeover approach from Melrose worth £7 billion last week.
Melrose has claimed that GKN is an “under-managed organisation without focus” with sub-par shareholder returns, but offers “huge scope for improvement”.
In making its firm offer, Melrose said the acquisition would deliver “significantly greater benefits to the shareholders of GKN than GKN could otherwise achieve on its own”.
It comes at a difficult time for GKN, which in November ditched its incoming boss less than two months before he was due to take the top job as it warned over another hit in its troubled US plant.
Melrose said the tie-up would create a group worth £11 billion – making it one of the largest in the UK.
Simon Peckham, chief executive of Melrose, said: “Since our approach was announced, the Melrose share price has risen as the market digests the attractive opportunity our proposal represents.”
He added: “However, the real value uplift will come from merging the interests of the two sets of shareholders and creating a business valued at approximately £11 billion today, of which GKN holders will own the majority, including Nortek, our US business which is trading strongly.”
GKN shares rose for the fourth day in a row, up nearly 1% after the takeover details were unveiled, while Melrose stock fell 2%.
The 430.1p a share deal will see GKN shareholders get 1.49 Melrose shares and 81p in cash for each share held.
The offer – which is 6.2% higher than the first approach – represents a 32% premium over GKN’s closing price on January 5, the last business day before Melrose made its first takeover approach.
Melrose has been seen as an aggressive hostile suitor, with its round of shareholder meetings this week a tactical move to ramp up its efforts to secure backing.
GKN has responded by vowing to separate its aerospace and automotive units and hiring a new chief executive to defend itself against the unwanted bid.
GKN’s new boss Anne Stevens – appointed on a permanent basis last Friday – as well as the firm’s finance director Jos Sclater are holding their own meetings with shareholders this week in order to discuss the company’s transformation plan, which is aimed at improving cash generation and profit margins.
Pension trustees have also waded into the takeover saga, warning on Tuesday over a £1 billion deficit in GKN’s schemes and saying that any deal for the company would have to go through them first.
They cautioned that Melrose or any potential bidders would have to make plans to tackle the funding gap in the pension schemes as a priority – with retirement plans for more than 32,000 members at stake.
GKN, which makes wing tips for Airbus and parts for car giants including Mercedes and Jaguar Land Rover, revealed last year that a review of its US aerospace plants had uncovered additional write-offs of between £80 million and £130 million.
It had previously expected to write off £15 million on its Alabama facility, relating to “revised assumptions” on programme inventory and receivables balances, which sparked a wider review across the division.