GKN inks deal with Dana as it attempts to fend off Melrose bid
Takeover target GKN has reached an agreement to merge its automotive business with US firm Dana in a 6.1 billion US dollars deal (£4.4 billion), as part of efforts to fend off a hostile bid from Melrose Industries.
Dana, which specialises in car part manufacturing, described the combination with GKN's Driveline division as "transformative".
It will see Dana fork out 1.6 billion US dollars in cash to GKN, assume one billion US dollars of pension liabilities and issue 3.5 billion US dollars worth of shares to GKN investors.
GKN has a major operation in Telford and employs about 340 people at Hadley Park, making structural parts including wheels.
The move is not set to affect operations at the Telford site, which comes under the Wheels and Structures division.
The news comes as part of GKN's Project Boost – its plan to persuade investors not to back Melrose's £7.4 billion bid – saying a proposal to separate GKN Aerospace and GKN Driveline into two listed companies would instead be more beneficial.
The Driveline division booked £377 million in profit last year on revenues of £5.3 billion.
Dana said the combined entity will boast sales of approximately 13.4 billion US dollars and deliver 235 million US dollars of annual cost savings within three years.
Under terms of the agreement, Dana shareholders will own 52.75 per cent of the company and GKN the remainder.
"This transformative and strategic transaction solidifies Dana as a world leader in vehicle drive systems and establishes a leading position in electric propulsion, which we see as the future of vehicle drivetrains," said James Kamsickas, president and chief executive of Dana.
"We have a long history of partnering with GKN, and the companies possess similar cultures and exceptionally talented people. Our highly complementary businesses share a deep understanding of our customers' long-term requirements."
Driveline employs 35,000 people across operations in 23 countries and 61 manufacturing sites.
GKN has become a target following profit warnings in October and November after problems at its US aerospace division sent shares tumbling.
Pressure is mounting on the Government to intervene in the proposed takeover of the engineering giant, with unions and MPs warning over asset stripping and flagging national security concerns.
The Pensions Regulator (TPR) has also said the levels of debt involved in the deal raised concerns about whether Melrose would be able to service GKN's £700 million pension deficit.
