Melrose Raises Offer for GKN to $11.2 Billion to Sway Investors

Melrose specialises in buying industrial companies before improving them and selling them off

Melrose has increased its hostile bid for GKN and told shareholders in the United Kingdom engineering firm that it will be its "final offer".

Melrose has increased how much GKN shareholders will own in Melrose after the deal by three percent - from 57 percent to 60 percent.

In a notice to shareholders, it said that "the board continues to view the offer as entirely opportunistic and believes that its terms fundamentally undervalue GKN and its prospects".

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.

Melrose - a FTSE 250-listed industrial turnaround firm - increased its bid to 1.69 Melrose shares for every GKN share held, plus an unchanged 81 pence in cash, together equivalent to 467 pence per share based on Melrose's share price at close on Friday.

"The board of GKN is now evaluating the revised offer", GKN said in a statement in response.

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Investors have until March 29 to decide whether to take the cash-and-stock offer that would hand Melrose the task of turning around the struggling business, or stick with GKN's plan to sell off its automotive unit and focus on aerospace.

Melrose is not the right owner of GKN. The previous offer made in January was 1.49 new Melrose shares plus 81 pence cash. "Your board has unequivocally declined each time to enter into any such discussions". GKN shareholders will need to approve the merger, which means they will have to weigh its merits against a Melrose deal. However, Melrose argued that many GKN investors would neither wish nor be able to hold US stock.

GKN's chairman, Mike Turner, wrote to investors on Monday to point out that Melrose "lacks experience in several critical areas and that its priorities are inappropriate for running a global technology-based business like GKN".

"Many of you may not be able to hold the shares being offered by Dana as part of the consideration as they will not be listed in the United Kingdom", he added. That is higher than the level of Melrose's offer, which now values GKN at about 414.8 pence per share based on the Melrose share price, which was up 4 percent at 224.7 pence.

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

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