GKN launches its own merger bid as it fights takeover
Engineering giant GKN is fighting back against a hostile takeover – by proposing a merger of its own.
The firm, which employs 400 workers in Telford, is in talks with US firm Dana over a potential merger of its automotive business.
The move comes as GKN continues to fend off a hostile bid from Melrose Industries.
GKN has a major site in Hadley building chassis for commercial vehicles and tractors. There are also more than 1,000 workers at sites in Erdington, Kings Norton, Minworth and at the company’s headquarters in Redditch.
The company said in a stock market update that it has received a number of approaches and had engaged in discussions “regarding a potential combination of Dana with GKN Driveline that would be effected mainly in equity”.
Dana specialises in car part manufacturing and provides parts for the US Nascar racing circuit.
The news comes days after GKN firmed up the timings on ‘Project Boost’ – its plan to persuade investors not to back Melrose’s £7.4 billion bid. The firm says a proposal to separate GKN Aerospace and GKN Driveline into two listed companies would be set for mid-2019.
In a statement, GKN said: “The board of GKN considers that the company has world leading businesses that offer significant upside potential through the execution of Project Boost. However, it believes that the possible transaction under discussion could provide greater value to shareholders and should therefore be explored alongside the demerger.”
The statement added: “This compares with the Melrose offer which has been rejected by the board as fundamentally undervaluing the company and its prospects.”
The Driveline division reported £377 million in profit last year on revenues of £5.3 billion.
GKN, which employs about 58,200 staff, has become a target after profit warnings in October and November following problems at its US aerospace division sent shares tumbling.
Melrose was handed a double boost on Monday when its swoop for GKN won regulatory backing in the US and Canada. It aims to woo shareholders by promising them financial returns on its investment in the company.