Melrose makes $10.2 billion hostile offer to acquire GKN

Bloomberg

Melrose Industries Plc made a hostile 7.4-billion-pound ($10.2 billion) bid for GKN Plc, which spurned the approach, setting up a battle to win shareholder support for the deal or the aviation supplier’s own plan to break itself up.
The offer values GKN at 430.1 pence a share in cash and stock, Birmingham, England-based Melrose said in a statement. After rejecting an initial approach on the same terms and announcing a breakup plan, GKN reiterated today the offer undervalued the company.
Melrose, an investment firm that specialises in turning around industrial companies, said it acted after meeting with shareholders in Redditch, England-based GKN, a key supplier to Airbus SE and Boeing Co. The firm bid will add to the pressure on the target to come to the table and negotiate a deal.
GKN Chief Executive Officer Anne Stevens and Finance Director Jos Sclater are now meeting investors to shore up support for their strategy.
Shareholders should profit from all of the “clear upside potential in GKN, rather than handing almost half of this upside to Melrose,” the company said in a statement.
Melrose is striking at a delicate time for GKN, which said in November 2017 it was firing its incoming chief executive officer before he even started amid mounting write-
offs related to a troubled aerospace plant in Alabama.
Compounding the upheaval, the UK decision to leave the European Union has clouded the outlook for the country’s autoparts
manufacturers because of their reliance on open trade.
The planned breakup would separate GKN’s autos unit, which makes drivetrain components, from the more profitable aerospace division. The group also has metallurgy and land-systems divisions. With the announcement last week, GKN named Stevens to the CEO job on a permanent basis.
While the formal offer has the same components as the initial approach—1.49 Melrose shares and 81 pence for each GKN share—its value has risen from 405 pence a share with Melrose’s stock price since last week.
GKN added 0.1 percent to 442.50 pence at 10:46 am in London. The stock has risen almost 40 percent since the beginning of the year. Melrose fell 1.7 percent to 230.30 pence, and is up 8.5 percent year-to-date.
Vulcan Value Partners, a GKN shareholder, told the Financial Times this week it favors talks with Melrose.