Melrose Industries, the “turnaround specialist” that launched an unfriendly takeover of GKN plc in January, won its bid with the endorsement of 52.4% of voting shareholders accepting the $11-billion cash-and-stock offer. The victory ends the effort by GKN to preserve its independence and sell-off its Powertrain division to Dana Inc.
If that deal had been completed, it would have expanded the Dana driveline product range and its automotive market share, while GKN would have become a more “pure play” aerospace business.
A new GKN management team, installed in January, also put the group’s powder-metallurgy business up for sale in the first wave of a restructuring program aimed at improving its revenues and financial performance. It indicated other business lines would be considered for sale too, including GKN Driveline’s Wheels, Cylinder Liners and Off-Highway Powertrain businesses. It said it planned to continue developing its GKN Aero Additive Manufacturing, Driveline China, and eDrive Systems business.
Now, the GKN board of directors has recommended that shareholders accept the Melrose offer, though it restated its view that the offer “fundamentally undervalues” the GKN shares. That recommendation, it noted, was meant to allow shareholders to gain some value for their holding before Melrose declares its offer unconditional, as it has indicated it will do once it gains 75% of voting shares.
"We are, of course, disappointed by today's outcome and continue to believe Dana would be the best owner and operator of GKN Driveline," stated Dana president and CEO James Kamsickas. "This has always been an opportunity, not a required or critical asset. Dana is a strong, thriving company, and we will continue our focus on the execution of our enterprise strategy, delivering for customers and remaining responsible stewards of our shareholders' capital."
In Britain, the Melrose approach to GKN had been regarded with caution by politicians, because of the prestige of GKN’s engineering and manufacturing capabilities, and because of Melrose’s reputation for breaking up and selling off businesses. GKN’s 6,000 British employees and their long-term financial security has been a parallel concern.
Melrose in turn has included pledged to invest in R&D programs, and that the acquired GKN would remain headquartered in Britain.
“We are delighted and grateful to have received support from GKN shareholders for our plan to create a U.K. industrial powerhouse with a market capitalization of over £10 billion (est. $14 billion) and a tremendous future,” stated Christopher Miller, Melrose’s chairman.