Melrose mulls sweetening its bid for GKN as the deadline nears

Courtney Goldsmith
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Melrose specialises in buying industrial companies before improving them and selling them off (Source: GKN)

The clock is ticking on industrial turnaround specialist Melrose as the firm enters its final week to revise its more than £7bn offer for GKN.

GKN, which is battling against Melrose's hostile bid, announced on Friday that it had reached an agreement to merge part of its business with US-based auto parts firm Dana for $6.1bn (£4.4bn), dampening Melrose's takeover plans.

A spokesperson for Melrose has called the Dana transaction unattractive for GKN shareholders, "not least in terms of the uncertainty with regards to regulatory approvals and timetable".

Melrose has until 19 March to amend its offer for GKN, and reports by the Sunday Times suggest the firm will offer the engineering giant's shareholders a bigger slice of the enlarged company to sweeten the deal.

Currently, GKN investors would receive 57 per cent of the enlarged company while Melrose shareholders would own the rest. Melrose is also likely to increase the value of its offer by at least five per cent, adding hundreds of millions of pounds to its offer price, according to reports.

Last week, Melrose's shareholders voted overwhelmingly in favour of the £7.4bn takeover deal, which was first announced in January. The European Commission also approved the deal under EU antitrust laws on Thursday.

​The tussle for control over GKN has unleashed scrutiny from MPs. Last week, a group of 16 MPs said the proposed takeover of GKN by Melrose should be blocked, in a letter to the business secretary, due to the possible threat to thousands of GKN jobs.

The Pensions Regulator has also warned that a takeover could threaten the firm's ability to fund its pension scheme.

Read more: GKN seals $6.1bn Dana auto tie-up deal to dampen Melrose takeover hopes

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