The engineering giant GKN has fought off a £7.4bn hostile takeover from Melrose Industries, according to BBC News.
Melrose, which specialises in turning around struggling businesses, claimed it could “deliver significantly greater benefits” for GKN shareholders compared to the current management. However, GKN said that Melrose had “fundamentally undervalued it” and that the terms of the revised offer, increased from £7bn in an initial bid, were “effectively unchanged.”
The offer proposed that current GKN shareholders would own 57% of the new, larger group and would become “major participants in the potential future value creation in both the GKN and Melrose businesses.”
A statement from GKN on Wednesday said that Melrose’s bid would “materially dilute the exposure of GKN shareholders to the meaningful upside opportunities that the board believes are present in the group.”
In 2017 GKN began a wide-ranging review of its business, prompted by lower profit margins and cash generation. There was a profit warning for the company after problems in its aerospace division were uncovered.
The company announced a strategy named Project Boost earlier in January, which would increase cash flow by cutting costs and expenditure as well as introducing tighter pricing controls. There are also plans to split the aerospace and automotive divisions into separate companies at some point.