Investor Alert

March 29, 2018, 11:21 a.m. EDT

GKN shareholders accept £8.1 bln bid from Melrose

By Ian Walker

Turnaround specialist Melrose Industries PLC (MRO.LN) has won its battle to take control of GKN PLC (GKN.LN) after getting acceptances from 52.43% of the British engineer's shareholders.

In a hotly contested battle, that has seen the two companies arguing backward and forward for the past three months and intervention by the British Government, Melrose said Thursday that the offer is now unconditional as to acceptances and urged the remaining GKN shareholders to accept the offer as soon as possible.

It said the offer will remain open for up to 14 more days, and that it expects the offer to become wholly unconditional by April 19.

Melrose first approached GKN, one of Britain's oldest companies, on Jan. 8 with a cash and share offer worth 7.4 billion pounds ($10 billion) at the time, that would've given GKN shareholders 57% of the enlarged group. The offer was rejected by GKN, saying it undervalued the company and GKN pledged to once again reinvent itself. Melrose then put its offer straight to shareholders, and the two companies have been at loggerheads ever since.

As part of its defense GKN said it would return GBP2.5 billion to shareholders over the next three years, and pay 50% of free cash flow as dividends up to 2020. It subsequently agreed to merge its Driveline unit with Dana Inc. (NYS:DAN) in a deal worth $6.1 billion. Under that deal, GKN shareholders would receive 47.25% of a new entity called Dana PLC, which would've been listed on both the NYSE and LSE.

Melrose fought back, describing the sale as "hasty," and subsequently raised its offer for GKN to GBP8.1 billion.

Earlier this week Melrose pledged to the British Government that it would keep GKN's aerospace division until April 1, 2023 if it won control. It also said it was committed to keeping the company's listing and headquarters in the U.K. for the next five years.

The U.K. Secretary of State for Business, Energy and Industrial Strategy Greg Clark had sought commitments from Melrose that the company would keep operating and paying tax within Britain. He also raised concerns about the implications of a takeover for the U.K.'s armed forces, which GKN supplies with components and services.

GKN shares at 1506 GMT were up 6% at 448.20p; Melrose Industries shares up 1.4% at 226.40p

Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749

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