GKN retracts comments over shareholder support and sweetened Driveline deal
GKN’s fate could be sealed at a shareholder vote over the £8.1 billion Melrose bid this week.
GKN has retracted comments citing shareholder support for management and a now-sweetened deal to sell off its Driveline business just days before a crucial vote on a £8.1 billion hostile takeover by Melrose.
The company was challenged by the Takeover Panel – which supervises and regulates takeovers and mergers – over comments made to the Sunday Telegraph and Sunday Times.
Chief executive Anne Stevens was cited as saying she was convinced investors would back GKN as it fights off the Melrose bid, while group finance director Jos Sclater said that “long-only shareholders are mostly supportive of existing management, and understand that the Dana deal and becoming a pure play aerospace company has, longer term, significantly more value than the Melrose bid.”
GKN issued a market announcement on Monday, saying it “confirms that these statements of shareholder support in respect of GKN were not verified and are hereby retracted”.
Melrose was also recently forced to make clarifications over a press statement this month, with chief executive Simon Peckham having told the Sunday Telegraph that GKN had lost the support of UK institutional investors.
It clarified that the comments referred to a decrease in overall institutional shareholder stakes over a period of five years, and was not a statement of support for the Melrose offer.
The announcement comes just days before GKN’s fate could be sealed as part of a shareholder vote over the £8.1 billion Melrose bid.
GKN investors have until 1pm on March 29 to cast their ballots on the controversial deal – though news that US firm Dana has now upped its offer for GKN’s auto business has increased the stakes ahead of the vote.
Dana – which specialises in car part manufacturing – raised its cash offer on Monday by 8.6% or 140 million US dollars (£100 million), bringing the total cash consideration to 1.77 billion US dollars (£1.28 billion).
The US company said it would also double the size of its share repurchase programme to 200 million US dollars (£145 million), helping sweeten the overall deal which was previously valued at around £4.4 billion.
GKN welcomed the announcement – which will see its shareholders own more than 47% of the combined company that is set to be listed on both the New York and London stock exchanges – adding that £700 million would be returned to shareholders “as soon as practicable” after the deal is completed.
We are confident that, following the Dana transaction and the non-core disposals, GKN will become a pure play aerospace company with a strong balance sheet, our pension challenges behind us and a clear plan for delivering leading margin performance GKN chairman Mike Turner
Plans to sell Driveline are part of a raft of counter-measures meant to fend off Melrose’s advances – having become a takeover target following profit warnings in October and November after problems at its US aerospace division sent shares tumbling.
GKN has doggedly rejected Melrose’s advances, with chief executive Anne Stevens describing the takeover as “high-risk” and the offer not coming close to reflecting true value.
Commenting on the sweetened deal with Dana, GKN chairman Mike Turner said: “This transaction, which along with Project Boost was initiated prior to the Melrose bid, offers by far the best strategic route forward for GKN Driveline.
“We are confident that, following the Dana transaction and the non-core disposals, GKN will become a pure play aerospace company with a strong balance sheet, our pension challenges behind us and a clear plan for delivering leading margin performance.”
He added: “We believe that Melrose would find it extremely difficult to create equivalent value in the future from GKN Driveline if its offer were to be successful.”
Melrose chairman Christopher Miller criticised the new offer.
“Today’s tweak of terms on the sale of Driveline to Dana does not offset the 7% reduction in equity value since the announcement. It is a small recompense for what would be lost potential for GKN shareholders, even when compared to GKN’s own £900 million higher valuation for the business.
“The last-minute attempts of claiming shareholder support that then had to be retracted is a sign of desperation.”