Melrose has raised its hostile bid for GKN, telling shareholders in the FTSE 100 engineering firm it will be its “final offer”.
In its third attempt to land the company, the turnaround specialist said its increased bid – at 467p per share – would value GKN at £8.1bn and give investors a 60% stake in the expanded Melrose.
Its previous offer valued GKN at £7.4bn and included 57% of Melrose equity.
GKN shares were 2.5% higher at 446p in early trading on the FTSE 100 – changing hands below the raised takeover price.
That reflects considerable uncertainty on whether the deal will happen.
Melrose has gone directly to shareholders with its offer because, it said, the GKN board continued to refuse any “constructive discussions”.
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”.
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.
It responded to the revised bid by urging investors to do nothing while it evaluated the terms.
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.”
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.”