Melrose Industries PLC (LON:MRO) has described GKN PLC’s (LON:GKN) decision to retract statements suggesting shareholders were against the turnaround specialist’s hostile takeover bid for the engineer as “a sign of desperation”.
GKN chief executive Anne Stevens had told The Sunday Telegraph that she was convinced investors would back her plan to sell the engineer’s automotive business, Driveline, to Dana Inc (NYSE:DAN) over Melrose's £8.1bn takeover offer.
The company’s finance director, also told The Sunday Times that "long-only shareholders are mostly supportive of existing management, and understand that the Dana deal and becoming a pure play aerospace company has, longer term, significantly more value than the Melrose bid".
However, on Monday GKN said the statements of shareholder support “were not verified and are hereby retracted”.
READ: GKN receives sweetened offer from Dana as deadline for Melrose takeover bid looms
In response, Melrose said: “The last-minute attempts of claiming shareholder support that then had to be retracted is a sign of desperation.”
GKN shareholders have until Thursday at 1pm to either back the company’s own turnaround plan or support Melrose's bid.
Ahead of the deadline, GKN said earlier on Monday that Dana has increased its bid for Driveline by US$140mln in cash.
GKN shareholders will now receive US$1.77bn after deducting US$1bn for the transfer of the group’s pension deficit to the combined group.
Melrose says Dana's bid for GKN Driveline not good enough
Melrose said the change in the terms of the sale of the business did not offset the 7% reduction in GKN’s equity value since the announcement.
“It is a small recompense for what would be lost potential for GKN shareholders even when compared to GKN's own £900mln higher valuation for the business,” said Melrose chairman Christopher Miller.
“We urge shareholders to cast their votes for a proven Melrose team with an outstanding track record and a plan to revitalise GKN, creating tremendous value and outcome for all stakeholders.
“The alternative is the reckless dismemberment of a business and needless value destruction for all stakeholders.”
Melrose’s offer values GKN at 458p per share but the engineer said it believes the deal “fundamentally undervalues” the company. GKN thinks its true value is more than 500p per share.
Melrose argued that its share price would need to increase by “only 12%” in order to match the “optimistic estimate of the GKN sum-of-the-parts value set by its board”.
It also attacked GKN’s “rushed sale of 73% of the business” over the next 12 to 18 months.
GKN says Dana merger will create value for shareholders
As well as selling Driveline, GKN plans to offload non-core units, including Powder Metallurgy, to operate solely as an aerospace business.
GKN believes the plan would create US$235mln in cost synergies while a combination of Driveline and Dana would strengthen its ability to take advantage of opportunities in the fast-growing market for electric and hybrid vehicles.
“We are confident that, following the Dana transaction and the non-core disposals, GKN will become a pure play aerospace company with a strong balance sheet, our pension challenges behind us and a clear plan for delivering leading margin performance,” said GKN chairman Mike Turner.