Embattled engineer GKN has rejected a £7.4 billion takeover offer from Melrose Industries in what marks Britain’s largest hostile bid since 2009.
GKN rebuffed the unwanted swoop by turnaround specialist Melrose, saying the formal cash-and-stock offer was "effectively unchanged" from last week’s initial approach, which it rejected for undervaluing the firm.
The bid marks the UK’s biggest unsolicited takeover approach since Kraft’s controversial offer for Cadbury in 2009.
The offer values GKN at 430.1p a share, while Melrose is also proposing to take on around £1 billion of debt.
Under the reverse takeover, GKN shareholders would own around 57% of the combined group and would become "major participants in the potential future value creation in both the GKN and Melrose businesses", Melrose said.
Melrose, which specialises in buying and rejuvenating manufacturers, added its plan would "re-energise and re-purpose" GKN.
The unsolicited takeover bid for one of Britain’s oldest companies comes after Melrose sought to woo GKN shareholders this week in an effort to garner support for a deal.
But GKN pointed out that the terms of the approach remain unchanged, with the offer only rising by 6.2% as Melrose shares are now worth more having increased since the takeover interest first emerged.
Anne Stevens, who was appointed permanent chief executive of GKN last week, said: "We believe GKN’s current owners should retain all the benefits of the clear upside potential in GKN, rather than handing almost half of this upside to Melrose and its shareholders.
"We have already stated that the terms of Melrose’s offer fundamentally undervalue the company and we are actively engaging with shareholders to explain how our transformation plan will provide value."
GKN, which makes wing tips for Airbus and parts for car giants including Mercedes and Jaguar Land Rover, advised shareholders to "take no action" and said it would unveil more details soon to further explain plans to overhaul the business.
In making its firm offer, Melrose said the acquisition would deliver "significantly greater benefits to the shareholders of GKN than GKN could otherwise achieve on its own".
It comes at a difficult time for GKN, which in November ditched its incoming boss less than two months before he was due to take the top job as it warned over another hit in its troubled US plant.
Melrose said the tie-up would create a group worth £11 billion - making it one of the largest in the UK.
Simon Peckham, chief executive of Melrose, said: "The real value uplift will come from merging the interests of the two sets of shareholders and creating a business valued at approximately £11 billion today, of which GKN holders will own the majority, including Nortek, our US business which is trading strongly."
GKN shares slipped after initial gains, having risen for three days straight after the takeover details were unveiled, while Melrose stock fell 2%.
The deal will see GKN shareholders get 1.49 Melrose shares and 81p in cash for each share held.
The offer represents a 32% premium over GKN’s closing price on January 5, the last business day before Melrose made its first takeover approach.
Melrose has been seen as an aggressive hostile suitor, with its round of shareholder meetings this week a tactical move to ramp up its efforts to secure backing.
GKN has responded by vowing to separate its aerospace and automotive units and hiring a new chief executive to defend itself against the unwanted bid.
Pension trustees have also waded into the takeover saga, warning on Tuesday over a £1 billion deficit in GKN’s schemes and saying that any deal for the company would have to go through them first.