GKN rejects second Melrose bid

The stand-off continues

GKN chairman Mike Turner said the takeover specialist's third offer - about 10% higher than the one previously tabled - continued to "fundamentally undervalue" it. Under the prior deal Melrose offered 1.49 Melrose shares in addition to the 81 pence in cash and dividend entitlement. "GKN Directors will do the same in respect of their own beneficial shareholdings".

Under the proposal, GKN shareholders would own 60 per cent of Melrose, and receive £1.4bn in cash.

Shares in Melrose were 4.6% lower at 214.40 pence on Monday, while GKN shares were down 1.2% at 430.20 pence.

GKN, which makes parts for auto companies and aircraft manufacturers, cited the impact of Melrose's share price fall on the value of the bid as a reason for spurning the offer. "Due to this, we have shared our concerns about the proposed hostile takeover bid by Melrose and want to express to you why we believe the takeover should not succeed".

"We believe the interests of shareholders in both companies are best served by accepting Melrose's raised bid", David Cumming, Aviva Investors' chief investment officer for equities, said.

GKN shares were down 2.7% on Monday afternoon at 423.50p, and Melrose shares were down 5.5% at 212.50p.

As part of its defense, GKN struck a US$6.1 billion deal on Friday to merge its automotive business with USA company Dana Incorporated, offering GKN shareholders a 47.25 percent stake in the enlarged, USA -listed group.

Together with GKN's plan to sell its powder metallurgy business, the deal will leave the company focused on aerospace, supplying parts for aircraft including the Black Hawk military helicopter and Eurofighter Typhoon.

Mr Miller said some GKN investors would not be able to hold the foreign listed shares, adding that the Driveline agreement was likely to involve a "lengthy and uncertain completion process" with competition clearances needed in the US, EU and China.

Melrose said on Monday that the deal with Dana was "ill-thought-through" and would face regulatory hurdles.

GKN has consistently dismissed the takeover as "opportunistic" - moving to offset any shareholder interest in a sale by planning to merge its Driveline automotive division with U.S. rival Dana in a deal worth £4.4bn.

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