GKN (LON:GKN) has agreed to merge its Driveline business with US-based Dana, the blue-chip company has said. The move comes amid the FTSE 100 group’s ongoing takeover battle with Melrose Industries (LON:MRO).
Investors have responded positively to the deal, with GKN’s share price having added 0.59 percent to 423.90p as of 13:16 GMT. The shares are outperforming the benchmark FTSE 100 index which has fallen into negative territory and is currently 0.12 percent lower at 7,194.73 points.
GKN agrees automotive deal with Dana
GKN announced in a statement today that it had reached an agreement to combine its Driveline business with Dana. As a result of the deal, shareholders in the FTSE 100 group will receive 47.25 percent of the fully diluted share capital of the new company, Dana Plc. GKN will also receive $1.6 billion (£1.2 billion) in cash. The proposed transaction values GKN Driveline at a total enterprise value of $6.1 billion (£4.4 billion), based on Dana’s closing share price as at the last business day.
“This combination of GKN Driveline and Dana will create a US and UK led global market leader in vehicle drive systems,” the FTSE 100 group’s chairman Mike Turner commented in the statement.
‘Superior’ to Melrose offer
GKN further noted that it believed that the deal with Dana provided „significantly greater value for GKN's shareholders than the Melrose Offer”.
“The Board believes that this strategy is far more attractive for GKN shareholders than the Melrose proposal which fundamentally undervalues GKN,” Turner pointed out.
The company noted that the last business day on which shareholders can accept the Melrose offer was March 29, barring an extension by the Takeover Panel. At the time of writing, Melrose had not commented on GKN Driveline’s proposed tie-up with Dana.