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GKN accuses Melrose of trying to buy it 'on the cheap'

By James Pugh | Telford | Business | Published:

Engineering giant GKN, which employs more than 300 people in Shropshire, has accused Melrose of trying to buy the group "on the cheap".

The GKN site in Telford

It comes as it rejected the latest overtures from the turnaround specialist, which is pursuing a £7.4 billion takeover of the engineering giant.

In the latest back and forth between the companies, Melrose disclosed formal terms of its offer to the market today, which includes a pledge to "simplify and declutter" GKN while creating an "engineering and industrial powerhouse worth over £10 billion".

In a letter to investors from Melrose chairman Christopher Miller, the group also promised to plough £150 million into GKN's pension scheme amid concerns the takeover would saddle the business with a higher and potentially unsustainable debt burden.

"This is the highest price that GKN has ever traded in the past 10 years," Mr Miller said of the 418.3p offer.

However, the latest charm offensive was swiftly knocked back by GKN, which described its offer as "derisory".

GKN boss Anne Stevens said: "This offer is derisory. Melrose is trying to buy GKN on the cheap and with GKN's own money, just at the point when our company is beginning to reap the benefits of its long-term investments.

"GKN's new leadership team is committed to maximising shareholder value.

"We are excited about presenting 'Project Boost' and our wider transformation plan to shareholders in the next two weeks.

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"We will show how we expect to deliver a step-change in operational performance and financial returns, based on real engineering not financial engineering. We remain committed to separation at the right time."

GKN, which has a major operation in Telford and employs about 340 people at Hadley Park making structural parts including wheels, has previously claimed the US suitor had made "fake" claims and "misleading statements".

The group said last month that Melrose's offer represents a "fake premium".

Melrose has swooped on GKN, which employs 58,200 people, after profit warnings in October and November following problems at its US aerospace division sent shares tumbling.

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GKN makes parts and systems for roughly half the world’s passenger cars. However, the shift to hybrid electric vehicles could threaten that position. GKN has been investing heavily for years in electric technology.

In 2017, the research and development hit to profits was £36m, with total investment of more than £123m over the past six years, GKN said.

But the company said this was now paying off.

“Whilst impacting near-term financial performance, this investment is now delivering strong sales and order book growth,” the group said in a statement.

James Pugh

By James Pugh
@JamesP_Star

Shropshire Star Business and Farming Editor.

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