GKN close to completing deal with US's Dana in move which could scupper Melrose bid

Lucy White
VW Automobile Assembly
GKN's driveline business makes components for businesses such as Volkswagen (Source: Getty)

Engineering giant GKN, which is currently trying to fend off a £7.4bn bid from turnaround investor Melrose Industries, is nearing a deal to merge part of its business with Dana.

FTSE 100-listed GKN is planning to combine its driveline business with US-based Dana, a maker of axles and driveshafts, and an agreement could be reached within the next two weeks, Reuters reported today.

If a deal does go ahead, this could upend Melrose's bid which shareholders are due to vote on at the beginning of April. Both GKN and Melrose declined to comment.

Read more: GKN considers giving shareholders more time to mull Melrose's hostile bid as it awaits national security feedback from the US

Yet there could still be a large hurdle for the Dana deal to overcome. Sources told Reuters that the US business is planning to finance the deal with its own stock, which has slumped since the beginning of the year and could be pushed down even more by Donald Trump's efforts to create a US trade war.

In a grilling from MPs yesterday, GKN's chief executive Anne Stevens declined to elaborate on the talks being held with Dana. However she did say that the firm had received many approaches from other companies since Melrose's attack began.

Read more: DEBATE: Should the government block the Melrose takeover bid for UK engineering giant GKN?

In an attempt to dissuade shareholders from accepting the hostile bid, GKN's management had announced a plan to split the two main parts of the business – driveline and aerospace.

But the business said last week that a "combination" of the driveline branch with Dana could provide greater shareholder value than its original plan.

GKN's driveline division, which counts names such as Fiat Chrysler and Volkswagen among its customers, boosted revenue by 15 per cent last year to £5.3bn.

Read more: GKN condemns Melrose's "low price and high risk" offer as it publishes formal document pressing shareholders to turn down the £7.4bn bid

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