Melrose has offered to put in GBP1bn to GKN pension fund

Melrose has offered to put in GBP1bn to GKN pension fund

GKN and Melrose have yet again locked horns as the bitter hostile takeover battle bid for the British supplier continues apace with a pension proposal from the investor group.

Following a series of discussions with GKN's Pension Scheme trustees, Melrose said it had made a formal proposal to inject up to GBP1bn (US$1.4bn) during its ownership period,

The group says this represents almost twice the amount of the deficit reduction package with GKN's planned disposals.

On the same day (19 March), the UK supplier said its proposed combination with Dana, would see the business being combined on the New York Stock Exchange and would hold a standard listing on the London Stock Exchange.

GKN says the combined group would create a US and UK-led "global leader in vehicle drive systems and electric propulsion" expected to deliver US$235m in synergies.

"Since announcing the deal to bring GKN Driveline and Dana together, I have had the opportunity to speak to many of our shareholders and explain why I am so excited about this prospect," said GKN chief executive, Anne Stevens.

"The complementary nature of the two businesses and our shared commitment to R&D and long term investment creates a fantastic opportunity to build a world-leading company and create meaningful shareholder value.

"The listing on the London Stock Exchange will make it possible for more of our shareholders to participate in the expected value creation opportunity from the combined Dana and GKN Driveline business."

However, with characteristic bluntness, Melrose has dismissed GKN's move as "hastily-assembled and ill-considered proposals," which would "destroy" potential value and add significant risk, not just for shareholders but in the underlying businesses themselves.

"By accepting the Melrose offer, GKN Shareholders will keep the potential value of all the GKN assets as majority owners of a much larger business and a management team with a clearly superior track record," said Melrose chairman, Christopher Miller.

"Unless they accept our offer, GKN shareholders will end up with shares in an Aerospace business overburdened with up to GBP3bn of pension liabilities upon the planned disposals and a minority shareholding in a Dana-managed Driveline business without a UK primary listing, which many won't be able to hold.

"The proposal we have made to the trustees of up to GBP1bn of contributions under our ownership is a clear example of what Melrose does which is good for pensioners and shareholders alike and shows we are a good custodian for all stakeholders."