Dana is in a pitch battle with a rival suitor for GKN and had suggested a dual listing offer to GKN shareholders in an effort to fend off a rival bid by Melrose, a turnaround organization. Now key investors are weighing in.
What seemed like a done deal only a few days ago is still very much on the table.
Over the past week Melrose has boosted its bid with a promised injection of £1B ($1.8 billion CAD) into GKN’s pension fund and lowered the threshold for the deal from 90% of shares to 50.1%.
Now GKN’s third largest shareholder has come out squarely against Melrose offer. Columbia Threadneedle, which has 3.5% share in GKN–and approximately 6% in Melrose–has joined a growing chorus of shareholders against the Melrose offer. “After careful consideration, we believe the actions set out by the new team at GKN present the best options for shareholders. Accordingly, we are not accepting the Melrose offer,” Richard Colwell, head of UK equities at Columbia Threadneedle, said in a statement.
Notably, Aviva had come out in favour of the Melrose offer.
The battle has been ongoing.
GKN had agreed a $6.1 billion deal in early March to merge its automotive division with Dana hoping to fend off an unwanted takeover approach by Melrose, but Melrose raised its bid to approximately $11 billion for essentially all of GKN. The actual value of the offers has become more variable as share prices respond to the battle.
GKN would consider listing shares in both London and New York as a volley for fend off Melrose. The offer for listing on both exchanges may be significant as shareholders may be wary of listing on the NYSE or be unable to hold shares listed outside the U.K.
In an added wrinkle, GKN’s largest customer, Airbus, said it would not commit to further business if the Melrose deal went through, citing the need for assured commitments to R&D and long term strategic vision.
GKN’s Anne Stevens, Chief Executive, and Jos Sclater, Finance Director believe shareholders should not accept Melrose’s offer.
Dana, understandably, argued that its deal is better for GKN shareholders.
Mike Turner, Chairman of GKN, commented:
“This combination of GKN Driveline and Dana will create a US and UK led global market leader in vehicle drive systems. The synergies between these two businesses and our complementary product portfolios make this a great deal for GKN shareholders.
“Following the transaction, GKN shareholders will own 47% of a $14 billion revenue, global automotive group and will retain ownership of GKN’s outstanding remaining businesses.
GKN is continuing to pursue the sale of its non-core businesses including Powder Metallurgy. The Board remains committed to delivering up to £2.5 billion of cash returns to shareholders over the next three years.
“The Board believes that this strategy is far more attractive for GKN shareholders than the Melrose proposal which fundamentally undervalues GKN and therefore the Board unanimously recommends that GKN shareholders reject the Melrose proposal and vote in favour of the proposed combination with Dana.”