Acquisition terms announced
Melrose raises bid for GKN to £7.4 billion
Melrose’s acquisition will create one of Britain’s biggest companies
Melrose Industries has raised its offer for engineering giant GKN to £7.4 bilion which will create a combined business worth £11bn.
Based on Melrose’s closing price of 234.3p the bid values each GKN share at 430.1p per share or 1.49 new Melrose share for each GKN share and 81p in cash.
It represents a premium of approximately 29% to the closing price of 332.7p per GKN Share on 11 January, being the last business day before the offer was lodged.
It is 32% above the closing price of 326.3p per GKN Share on 5 Januar, which was the last trading day prior to the approach made by Melrose to the GKN board.
GKN shareholders would own approximately 57% of the enlarged group.
US activist investor Elliott Advisors had urged GKN to talk with Melrose after the company rejected a 405p per share cash-and-stock offer this month.
The Acquisition will be funded through a new debt facility which would also be used to refinance existing indebtedness of Melrose and GKN.
Melrose has been advised by Rothschild and RBC Europe.
Simon Peckham, chief executive of Melrose said: “Since our approach was announced, the Melrose share price has risen as the market digests the attractive opportunity our proposal represents.
“As a result the implied premium has grown from approximately 24% to approximately 32% since our approach.
“However, the real value uplift will come from merging the interests of the two sets of shareholders and creating a business valued at approximately £11 billion today, of which GKN holders will own the majority, including Nortek, our US business which is trading strongly.
“We are having discussions with shareholders about the potential for the merged business, which will be one of the largest companies in the UK.”
Christopher Miller, chairman of Melrose said: “Like GKN, Melrose is a UK company operating internationally. Since formation we have generated a total net shareholder value increase of £4.9 billion and our latest acquisition, Nortek is performing ahead of our initial plan.
“We have repeatedly improved underlying operating margins in our own businesses by 30 to 70% from their original levels. We can reinvigorate their businesses and create positive outcomes for shareholders, employees and customers around the world.”