Melrose quickly derides GKN Driveline-Dana plan for London listing

Turnaround specialist Melrose was quick to respond to the latest development in GKN’s quickly-organised breakup on Monday, saying its own final offer of 466p in value today and 60% of future value creation for the whole of GKN was “clearly superior” to the “hasty break-up” being pursued by the GKN board.

The FTSE 250 firm said that, following GKN's planned disposals, its orphaned aerospace division could be left overburdened with up to £3bn of volatile gross pension liabilities - which it said was equivalent to 11 times its trading profit, and three times the average for the FTSE 100.

Instead of an improved Driveline business, GKN shareholders would receive a minority stake in a Dana-managed business without a UK primary listing, with shares that Melrose claimed many would neither be able or, in its view, wish to hold.

The proposed sale valued Driveline at approximately £800m less than the valuation that GKN itself assigned to the business on 15 February, Melrose nored.

It said its offer avoided such diminution of value and heightened pension and de-rating risk, reminding shareholders that the acceptance condition for the Melrose offer was lowered from 90% to 50% plus one share, with a deadline of 1300 BST on 29 March.

Additionally, following a series of discussions with GKN's pension scheme trustees, Melrose confirmed that last week it made a formal proposal to inject up to £1bn over the Melrose ownership period, which it said represented almost twice the amount of the deficit reduction package under GKN's planned disposals.

“GKN's series of hastily-assembled and ill-considered proposals destroy potential value and add significant risk, not just for shareholders but in the underlying businesses themselves,” said Melrose chairman Christopher Miller.

“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.”

Miller said that, unless they accepted the Melrose offer, GKN shareholders would end up with shares in an aerospace business overburdened with up to £3bn of pension liabilities upon the planned disposals, and a minority shareholding in a Dana-managed Driveline business without a UK primary listing, which he said many would not be able to hold.

“The proposal we have made to the trustees of up to £1bn of contributions under our ownership is a clear example of what Melrose does which is good for pensioners and shareholders alike and shows we are a good custodian for all stakeholders.

“Melrose's measured approach represents certainty of strategy, value and management. We strongly urge GKN shareholders to accept our offer without delay.”