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GKN board rejects Melrose €8.1bn 'final offer'

By James Sillars and John-Paul Ford Rojas, Business Reporters
The board of FTSE 100 engineering firm GKN has rejected a "final offer" worth ?8.1bn in a hostile takeover attempt by Melrose.
GKN chairman Mike Turner said the takeover specialist's third offer - about 10% higher than the one previously tabled - continued to "fundamentally undervalue" it.However Aviva Investors, which holds stakes in both companies, signalled support for the bid.Earlier, Melrose set out the terms of its increased bid - at 467p per share - which would give GKN investors a 60% stake in the expanded Melrose.Its previous offer valued GKN at €7.4bn and included 57% of Melrose equity.GKN shares closed 2.5% lower - reflecting, market experts said, considerable doubt that Melrose would win the day.Melrose has gone directly to shareholders with its offer because, it said, the GKN board continued to refuse any "constructive discussions".It gained a favourable response from David Cumming, chief investment officer at Aviva Investors, which owns 5.4% of Melrose and 1.2% of GKN..
GKN board rejects Melrose €8.1bn 'final offer'

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He said: "As shareholders in both Melrose and GKN, we favour Melrose's proposed measured execution of value rather than GKN's reactive review of its business structure."Consequently, we believe the interests of shareholders in both companies are best served by accepting Melrose's raised bid."Melrose said the deal offered GKN's investors - who have grappled with a series of profit warnings linked to problems in its US aerospace division - an immediate premium of 43%.
It added that they had until 29 March to make up their minds as there would be no further increase "under any circumstances".:: Could €7bn offer prompt engineering giant GKN to split in two?GKN has consistently dismissed the takeover as "opportunistic" - moving to offset any shareholder interest in a sale by planning to merge its Driveline automotive division with US rival Dana in a deal worth €4.4bn.GKN argues its strategy offers investors superior value, at a time when regulators and MPs take a keen interest in what the Melrose offer might mean for GKN and its employees.Melrose chairman Christopher Miller said in a letter to shareholders on Monday: "We have recently made attempts to engage in constructive discussion with the GKN Board with a view to agreeing the terms of a recommended offer."Your board has unequivocally declined each time to enter into any such discussions with us and, as recently as Friday 9 March, was unwilling to even enquire on your behalf as to the terms of any revised proposal, a decision that no doubt you will find both surprising and disappointing."Instead of €1.4bn in cash and a majority investment in a stronger combined Melrose / GKN business, it appears the GKN Board prefers a minority stake in a foreign business (Dana) with no GKN management involvement."Mr Miller added: "In the interests of decisively resolving the future of GKN, we are pleased to set out the terms of an increased and final offer which would give GKN Shareholders 60% of the enlarged group and €1.4bn in cash."
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Rebecca O'Keeffe, head of investment at Interactive Investor, said: "The muted market reaction of the GKN share price to the increased offer of 467p by Melrose is the strongest indication yet that Melrose might not get its way and that GKN's management and their Project Boost strategy is winning."The robust efforts GKN has taken to protect itself from the hostile bid, including the proposed disposal of its Driveline business to Dana, combined with the comments from Melrose that their offer will 'not be increased under any circumstances' is leading investors to conclude that GKN has won this battle, at least for now."
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