The FTSE 100 engineering group GKN is facing a hostile takeover bid after rejecting an initial £7bn approach by Melrose Industries.
Melrose, which specialises in turning around the fortunes of manufacturers, said it had tabled a firm cash and shares offer, now worth £7.4bn, that would give GKN shareholders 57% of the combined business.
GKN attempted to see off the bid interest last week by announcing a transformation plan and succumbing to investor demands to separate its aerospace division, which has customers including Boeing and Airbus, from its car parts division.
It described the first approach by Melrose as “opportunistic” as it arrived at the time a new chief executive in Anne Stevens was settling in – the company having ditched its previous incoming boss, Kevin Cummings, before he was due to take charge.
Its US aerospace plants have also proved a financial drag on the business to the tune of up to £130m in write-downs.
The boss of Melrose, Simon Peckham, said of the offer to shareholders: “Since our approach was announced, the Melrose share price has risen as the market digests the attractive opportunity our proposal represents.
“As a result the implied premium has grown from approximately 24% to approximately 32% since our approach.
“However, 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, of which GKN holders will own the majority, including Nortek, our US business which is trading strongly.
“We are having discussions with shareholders about the potential for the merged business, which will be one of the largest companies in the UK.”
GKN shares were trading at 442p on Tuesday – above the offer price of 430.1p each.
The company responded to the offer by urging shareholders to “take no action”.
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Ms Stevens responded: “We believe GKN’s current owners should retain all the benefits of the clear upside potential in GKN, rather than handing almost half of this upside to Melrose and its shareholders.
“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.”