US automotive parts firm Dana has rejected a final $US2.7 billion bid from rival ArvinMeritor, citing fundamental antitrust barriers and substantial financial risks. Shortly after, ArvinMeritor put an end to one of the year's most bitter hostile takeover battles. Despite its commitment to the takeover, ArvinMeritor will now have to look for other ways to grow in the static automotive market.
On Sunday, November 23, automotive parts manufacturer ArvinMeritor terminated its bid for rival Dana, following Dana's board's unanimous rejection of the latest offer. Questions about ArvinMeritor's ability to finance the proposal and antitrust issues relating to the two companies' dominance in truck parts contributed to Dana's refusal. Dana's board added the offer was not in the best interests of its shareholders.
ArvinMeritor has been committed to this takeover since its first bid last July. The acquisition of Dana, the US-based automotive parts manufacturer, was an important part of ArvinMeritor's growth strategy. It would have helped ArvinMeritor to broaden its product portfolio, as well as lowering the overhead costs of the combined entity.
However, Dana rejected the original bid several times in the past six months. Dana has recently performed better than ArvinMeritor, and has been restructuring itself. In 2002, Dana posted sales of $9.5 billion, while ArvinMeritor only posted $6.9 billion in the same period.
ArvinMeritor indicated that it is not in the best interests of its own shareholders "to continue expending valuable corporate resources for an indeterminate period of time" and announced that it will focus on an "organic growth strategy".
Over the past few years there has been an unprecedented number of mergers and acquisitions within the automotive industry, resulting in nearly 100 global automotive parts manufacturers today. This merger wave has been fuelled by overcapacity in the market, consolidation of supply sources by the big three vehicle manufacturers, and pressures to increase shareholder value.
ArvinMeritor is one of many companies seeking to grow in a static market through acquisitory behaviour. It will now have to seek other low cost alternatives to increase profits and grow, such as entering new markets through joint ventures.