Melrose Industries has turned up the heat in its bid to acquire fellow UK-listed firm GKN, appealing to the latter´s shareholders in a hostile approach.
Engineering group GKN, meanwhile, appeared to be limbering up for a concerted fight as it issued its own appeal for its investors to reject the deal. It follows the GKN board´s rejection of the offer last week.
Melrose, a turnaround specialist known for its focus on industrial companies, pointed out that GKN shareholders would now be getting an even better deal given the recent rise in the value of Melrose shares.
“Since our approach was announced, the Melrose share price has risen as the market digests the attractive opportunity our proposal represents. As a result, the implied premium has grown from approximately 24% to approximately 32% since our approach,” said Simon Peckham, chief executive of Melrose in a statement.
Melrose is offering 1.49 of its own shares per GKN share, valuing each GKN share at 430.1p. The offer values GKN´s equity at £7.4bn.
As at 1125 GMT on Wednesday GKN´s shares were trading at 440.7p, down 0.3% on the session. Melrose was trading 230.5p, 1.6% lower on the day.
Melrose shares had risen around 7% since the takeover approach was announced last week, while GKN´s shares were about 33% higher.
Melrose insists it will also be able to deliver strong benefits should the approach be successful.
“The real value uplift will come from merging the interests of the two sets of shareholders and creating a business valued at approximately £11bn today, of which GKN holders will own the majority, including Nortek, our US business which is trading strongly. We are having discussions with shareholders about the potential for the merged business, which will be one of the largest companies in the UK,” said Melrose on Wednesday.
GKN defiantly retorted with its own statement on Wednesday as it focused its energies on trying to convince shareholders to reject the Melrose offer.
“We believe GKN’s current owners should retain all the benefits of the clear upside potential in GKN, rather than handing almost half of this upside to Melrose and its shareholders. We have already stated that the terms of Melrose’s offer fundamentally undervalue the Company and we are actively engaging with shareholders to explain how our transformation plan will provide value,” said GKN chief executive Anne Stevens in a statement.