GKN has rejected Melrose's revised and final takeover bid.
Melrose unveiled a new offer for the engineering company this morning, increasing its bid to £8.1bn, or 467p per share, having previously offered £7.4bn. The turnaround specialist said this would be a final offer, which would mean GKN shareholders would own 60 per cent of Melrose and receive £1.4bn in cash.
This afternoon, GKN said Melrose’s revised offer "continues to fundamentally undervalue GKN".
According to the FTSE 100 firm, the new bid does not reflect the value of GKN’s "world class aerospace business" or the benefits of combining GKN Driveline and Dana Incorporated - GKN last week agreed to merge its auto parts business with the US firm in a deal worth $6.1bn (£4.4bn).
GKN also said Melrose's second hostile bid does reflects neither the return of up to £2.5bn in cash to GKN’s shareholders over the next three years, "a significant part of which is expected to come in the next 12 to 18 months", nor an "illustrative trading sum-of-the-parts value of GKN as presented in GKN’s second response circular, which illustrates a value of over 500p per GKN share".
Mike Turner, chairman of GKN, said: “The board believes that Melrose’s revised offer continues to fundamentally undervalue GKN and has no hesitation in unanimously rejecting it.
“Shareholders should be aware that Melrose is asking them to accept its acquisition paper at 22x 2017 earnings, in exchange for world class businesses which Melrose’s offer only values at 14x 2017 earnings.
Melrose is not the right owner of GKN. Its management lacks relevant experience and its short term business model is inappropriate for GKN’s customers and its investors. Winning new business in our markets would be more difficult if customers were uncertain as to the identity of their future long term partners.
"Over the past few weeks, we have demonstrated how much we can achieve for our shareholders," Turner added.
"We ask for shareholders’ support as we continue with the transformation of GKN. Give us the opportunity to finish the job. Reject Melrose's offer."
Shares in Melrose were down 4.9 per cent at the time of writing, while GKN's stock was down more than two per cent.