British engineering giant GKN PLC (LON:GKN) has warned that Melrose Industries PLC’s (LON:MRO) proposed takeover of the company would weaken its pension scheme.
Earlier this month it rejected a £7.4bn offer from Melrose, saying it "fundamentally undervalued" the firm.
READ: GKN swats away second takeover bid
Melrose claimed that the offer represented a premium of approximately 32%, but GKN took issue with that statement and labelled it a “fake premium”.
On Monday, the FTSE 100 firm added another bullet point to its list of concerns should the deal be given the green light from shareholders.
It said that if the deal went ahead, it would increase GKN's debt levels to 2.5 times core earnings - much higher than at present.
“This may have implications for the covenant strength of the company, the level of the technical provisions deficit and therefore the level of immediate and/or long term cash funding requirements,” the statement said.
READ: Melrose to meet with GKN shareholders as it pursues £7bn takeover
Melrose has previously said it has "an impeccable track record of safeguarding and improving pensioners’ rights in every acquisition it has made”.
Earlier this month, the trustees said they could demand extra funding if plans for the company – whether from a takeover or break-up of the group as proposed by GKN – put its pension pot at risk.
GKN shares were broadly flat at 436p early on Monday.