GKN PLC (LON:GKN) is in talks with Dana Incorporated about the possible sale of the engineer’s automotive unit Driveline as it continues to fend off a hostile takeover bid from Melrose Industries PLC (LON:MRO).
The company was already planning to separate its automotive and aerospace businesses with the demerger expected to be completed by mid-2019.
In a statement on Friday, GKN said it believes the deal under consideration with Dana “could provide greater value to shareholders and should therefore be explored alongside the demerger” as opposed to a takeover by Melrose.
READ: Melrose picks holes in GKN's full year results as it pursues hostile takeover
“There can be no certainty that these ongoing discussions will lead to a transaction or as to the terms on which a transaction, if any, might be agreed,” it said.
“The company’s shareholders will be kept informed of any relevant developments and, in the meantime, are advised to take no action in relation to the Melrose offer.”
GKN rejected a £7.4bn offer from Melrose in January and advised shareholders to vote against the deal as it believes it undervalues the firm. However, Melrose has taken since taken its bid hostile.
In a separate statement on Friday, GKN said it has agreed to make a £160mln contribution to its UK pension schemes following the demerger of GKN Driveline and GKN Aerospace businesses.
“In addition, in the period prior to demerger, GKN will continue its practice of seeking to work with the Trustees in exploring and implementing, as appropriate, other liability management exercises in relation to the UK Pension Schemes,” GKN said.