GKN (LON:GKN) is expected to try to win over shareholders with a cash return and cost cuts this week, The Sunday Times has revealed. The move will come as the aerospace and automotive giant looks to fend off a hostile bid by Melrose Industries (LON:MRO).
GKN’s share price has been subdued in London in today’s session, having given up 0.05 percent to 399.30p as of 10:26 GMT. The shares are underperforming the broader market rally, which has seen the benchmark FTSE 100 spike 1.17 percent to 7,175.51 points so far today.
GKN to offer cash to shareholders
The Sunday Times reported yesterday that GKN was expected to offer a cash return to shareholders this week, as well as promise cost cuts in its defence document urging investors to reject Melrose’s £7.4-billion cash-and-share bid. The document is expected to include a pledge to sell GKN’s powder metallurgy business, which could be worth more than £2 billion, with the move expected to fund a cash injection for the group’s pension scheme as well as the giveaway to investors.
The news comes after the FTSE 100 group said on Friday that it was prepared to give investors more time to decide on Melrose’s bid, while reaffirming that it continued to believe that the offer was ‘derisory’.
Melrose hits back at group’s plans
The Times meanwhile quoted Melrose as accusing GKN of ‘opportunistic financial engineering,’ arguing that any potential plan to sell its powder metallurgy business to help to fund a bumper cash dividend was flawed.
“Shareholder approval will be required [for any sale]. We think shareholders will not want to sell on the business but rather achieve a full valuation later after a period under Melrose management,” a spokesman for the turnaround specialist told the newspaper.