Engineering giant GKN has slammed hostile suitor Melrose for making “misleading” statements over its pension scheme in the latest war of words between the pair.
GKN hit out at Melrose after the turnaround specialist stepped up its battle on Monday, offering to inject up to £1 billion into GKN’s pension scheme.
Melrose said this represented almost twice the amount of GKN’s plans to reduce the deficit in the scheme, and claimed that GKN’s deal to tie-up its Driveline car parts division with US firm Dana would “orphan” GKN’s aerospace arm with £3 billion of pension liabilities.
But GKN said: “These comments are misleading as to the true status of GKN’s pension obligations post the combination of our Driveline business with Dana.”
It comes as one of GKN’s largest shareholders – Colombia Threadneedle – said on Monday it planned to reject Melrose’s £8.1 billion takeover offer and gave its backing to the GKN board and its overhaul plans.
Colombia Threadneedle owns around 3.5% of GKN and is now the fifth shareholder to come out against the Melrose bid.
But Melrose also on Monday lowered the minimum threshold for shareholder acceptance of the bid from 90% of shares to 50.1%.
On the pension plans, GKN group finance director Jos Sclater said: “A month ago, Melrose appeared to suggest that its plan to pay £150 million into the pension scheme was sufficient.
“Now it appears to have unveiled a £1 billion plan that would achieve less than GKN’s own agreement with the trustees, at a greater cash cost which would erode shareholder value.
“I think our shareholders deserve better.”
GKN shareholders will decide on March 29 whether to accept Melrose’s bid for the company.
Officials from the Unite union pressed Melrose on how it will fund the pension injection and the timeframe, when they met the company in London on Monday.
Unite’s assistant general secretary Steve Turner said Melrose’s bosses had been “far from clear about the detail of their true intentions for GKN beyond vague platitudes and soundbites” and raised concerns over debt levels and job security for workers.
Melrose upped its bid from £7.4 billion to £8.1 billion last week in an attempt to secure the deal.
In rejecting the firm’s advances, GKN has announced a raft of counter-measures including the Driveline deal, which would see Dana shareholders own 52.75% of the company and GKN the remainder, with the combined company set to be domiciled in the UK but traded on the New York Stock Exchange.
GKN became a target following profit warnings in October and November after problems at its US aerospace division sent shares tumbling.
In response to GKN’s claims, a Melrose spokesman said GKN was “seeking to hide the true picture”.
“The real number UK shareholders and pensioners should consider is the £3 billion of liabilities that will hang round the neck of the rump aerospace business, which will have management profits of just £283 million,” he said.
He added: “GKN is selling 50% of its group profits to Dana but only transferring 15% of the UK pension scheme liabilities.
“That is the stark reality. They are not proposing to make any further payments into the scheme to reduce liabilities, whereas Melrose will pay £60 million a year for as long as necessary.”