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Melrose’s Hostile Bid Fended Off By GKN With A $6.2 Billion Auto Business Deal With Dana

Melrose’s Hostile Bid Fended Off By GKN With A $6.2 Billion Auto Business Deal With Dana
A hostile takeover bid by the investment group Melrose Industries Plc was thwarted by U.K. engineering form GKN Plc by agreeing to sell off its automotive unit to U.S.-based Dana Inc ini a deal that is worth $6.1 billion.
In addition to 1.6 billion in cash, stocks valued at 3.5 billion in the new group would be available for shareholders of GKN. On the other hand, about $1 billion in pension debt of GKN would be taken over by Dana, said the two companies while announcing the deal through a statement. 52.75 per cent of the share in the new entity would be held by Dana investors.
The unsolicited approach for GKN was valued at $10 billion or 7.4 billion pounds and the new deal would provide the engineering firm some form of strong defense against Melrose because the shareholders would now be presented with a concrete proposal to consider against the hostile takeover bid. Automakers are seeking to cut costs and the agreement between the companies would add heft to heft to Dana’s driveline business. o the other hand, the deal would leave GKN with a portion that would transform it into a complete aerospace company. 
The competing deal will “put significant pressure on Melrose to raise its offer,” said Sandy Morris, an analyst at Jefferies International in London.
Its talks with Dana was disclosed by GKN last week. The deal however is still dependent on the expiring of the offer from Melrose or the withdrawal of that hostile offer. The new entity formed because of the deal would result in a bigger group that would remain listed in New York but with its home country as the U.K.
In its fight against Melrose, the aerospace and automotive divisions of Redditch, England-based GKN had been started to be demerged. There is option of increasing the bid by the unwanted suitor said analysts. Melrose has described the break-up plans as “rushed” and unnecessary.

There were no comments from Melrose about the deal between GKN and Dana.
GKN said that up to 2.5 billion of cash returns to shareholders would be made by the company as it would continue with its attempts to sell off the powder-metallurgy wing.
The activities of Dana in axles, driveshafts and transmissions would be complemented by the Driveline business of GKN and there exists a long background of strong cooperation between the two companies, said Dana Chief Executive Officer James Kamsickas.
On the other hand, a larger role in the emerging business of electric vehicles and a presence in Asia would be available to Maumee, Ohio-based Dana as it its global business would get more diversified. The company had generated over 81per cent of its revenues last year from North America and Europe and hence it remains focused on these two regions.
“This transformative and strategic transaction solidifies Dana as a world leader in vehicle drive systems and establishes a leading position in electric propulsion, which we see as the future of vehicle drivetrains,” Kamsickas said.

Christopher J. Mitchell

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