Engineering group GKN wrote to its shareholders on Thursday, advising them to turn down a £7.4bn takeover bid from Melrose on the grounds the offer was "opportunistic" and "inappropriate".
In a letter to its shareholders, GKN said: "It is your board’s belief that this offer is entirely opportunistic and that the terms fundamentally undervalue GKN."
“The Melrose offer is not a good deal – it is low price and high risk,” said the letter, signed by GKN chairman Michael Turner (left).
He added: “On the basis of its most recent share price, Melrose claims its premium is 22%.
“By comparison, precedent FTSE 100 takeovers have an average premium of 43%." He added that Melrose had paid “materially higher" premiums in each of its prior public takeovers.
The letter also hinted strongly at Melrose's financial position and questioned the turnaround specialist's relevant experience, saying its "short-term business model is inappropriate for GKN".
Instead, GKN attempted to draw shareholders' focus to its own strategic plan that it hopes will turn around the business. The plans included disposals to fund a £2.5bn share buyback and new strategic targets to help deliver annual cash benefits of £340m from 2020.
Shares in GKN rose 1.53% to 417.6p in late morning trade on the London Stock Exchange. Shares in Melrose, meanwhile, rose 2.98% to 227.7p.
Picture courtesy of GKN website