Melrose increases offer for Britain's GKN to $10.2 bln

Given GKN’s long industrial history it now has more UK pensioners than current employees
Credit GKN

Melrose Industries Plc made a sweetened, 7.4-billion-pound ($10.2 billion) bid for GKN Plc, seeking to win over the United Kingdom maker of aerospace and automotive components after it spurned an earlier unsolicited approach.

Melrose said its new proposal represents a 29% premium to the closing price of GKN's closing price of 332.7p on January 11.

Melrose appealed directly to GKN's investors to back its earlier 7 billion pound takeover offer after GKN's board rejected it.

Melrose said that acquisition would "re-energise" GKN's operations to deliver "significantly greater benefits to the shareholders of GKN than GKN could otherwise achieve on its own".

Under the terms of the offer, GKN shareholders would own 57% of the enlarged group and, according to Melrose, would become "major participants in the potential future value creation in both the GKN and Melrose businesses".

Melrose had said on Friday that it believed there would be significant operational and commercial benefits arising from its ownership of GKN's businesses.

The second approach reflects a rise in Melrose's own share price since it first announced its interest in GKN.

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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.

Shares in vehicle and plane part maker GKN rose by 1.3% on Wednesday morning, although they have subsequently lost most of that ground. Pressure mounted after a profit warning in October and a writedown in November.

Melrose believes it can "re-energise and re-purpose" GKN's operations to boost its margins after the engineering firm issued two profit warnings towards the end of previous year.

Melrose chief executive Simon Peckham said in a statement: "The real value uplift will come from merging the interests of the two sets of shareholders and creating a business valued at approximately £11bn today".

"We have already stated that the terms of Melrose's offer fundamentally undervalue the company and we are actively engaging with shareholders to explain how our transformation plan will provide value".

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.

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