Melrose offers GKN pension trustees £1bn as deal deadline approaches

19 March, 2018, 19:14 | Author: Regina Silva
  • GKN will be left with its aerospace unit under its planned break-up

The move could allay concerns from the pensions watchdog and MPs, who have called for the deal to be blocked.

Insurance giant Aviva, a one per cent investors in GKN, last week said it would support Melrose.

GKN makes parts for planemakers Airbus and Boeing, as well as parts for Volkswagen and Ford cars.

Nearly a quarter of Melrose's shares are on loan to short sellers hoping its pursuit of GKN will fail - figures that have risen sharply in the last few days.

The Pensions Regulator had warned previously that the deal could weaken GKN's ability to meet its pension obligations.

The turnaround specialist also said that after GKN's planned disposals, its aerospace division would become overburdened with up to GBP3.00 billion of volatile gross pension liabilities, equal to three times its trading profit.

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"Unless they accept our offer, GKN shareholders will end up with shares in an Aerospace business overburdened with up to GBP3 billion of pension liabilities upon the planned disposals, and a minority shareholding in a Dana-managed Driveline business without a United Kingdom primary listing, which many won't be able to hold", Miller added.

However, on Monday, Dana announced that the planned new combined business would also have its shares listed on the London Stock Exchange, as well as the New York Stock Exchange, in order to address this issue.

The announcement comes as GKN hits back at the takeover bid by announcing that once it sells its Driveline business to the U.S. firm Dana, the resulting company will have a secondary listing on the London stock exchange as well as a primary listing in NY.

GKN Plc's rival suitors offered additional sweeteners to win over the United Kingdom aerospace supplier's shareholders, who are set to decide in coming weeks which side to support. "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 Chairman Christopher Miller.

The boards of both businesses have been battling to win over shareholder votes ahead of the deal's March 29 voting deadline.

It announced the concession despite saying a week ago that it had made its "final offer" to shareholders after the company rejected its advances on value grounds.

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