First, we had ‘fake news’ and now, thanks to GKN PLC (LON:GKN), we have ‘fake premiums’.
On Wednesday, the engineering giant turned down a second takeover offer from investment firm Melrose Industries PLC (LON:MRO).
READ: GKN swats away second offer from Melrose
Melrose said the terms of its £7.4bn hostile bid represented a premium of approximately 32% over GKN’s closing price on January 5 – the last business day prior to its initial approach.
GKN has taken issue with that, labelling the statement “misleading”.
‘True premium nearer to 11%’
“GKN’s board considers 32% to be a fake premium,” said a statement on Thursday.
“Melrose’s market capitalisation on January 5 was significantly smaller than GKN’s on the same day, Melrose is proposing to fund 80% of the offer consideration in shares and Melrose brings no industrial synergies.
“Instead, GKN’s shareholders are themselves funding the majority of this premium. The true, delivered premium is less than 11%.”
A lot of work clearly went into preparing the detailed response, with GKN taking the time to note every source and basis for its arguments at the bottom of the press release.
The FTSE 100 company also dismissed claims from Melrose that it wants a “hasty break-up” of its business, stating that any separation would take place when it makes most financial sense.
GKN’s gripes don’t end there either. It also told investors that it believed comments that its pension liability had increased were not accurate, while it also questioned Melrose’s net leverage expectations.
Offer ‘fundamentally undervalues’ GKN
There was one area of agreement, though.
“GKN wholeheartedly agrees with Melrose that GKN is comprised of world-leading businesses that offer upside potential.”
Chief executive Anne Stevens added: “We believe GKN’s current owners should retain 100% of the benefits of the clear upside potential in GKN, rather than handing 43% of this upside to Melrose and its shareholders.
“We have already stated that the terms of Melrose’s offer fundamentally undervalues the company and we are actively engaging with shareholders to explain how our transformation plan will provide value, whilst debunking some of Melrose’s inaccurate assertions.”
GKN shares were down 0.2% to 446.9p in mid-morning trade.