Dana Inc. has lost out on a proposal to purchase a significant part of a leading British automotive and aerospace supplier, a move that would have doubled the company’s annual revenue and given it broader access to the growing electric vehicle market.
GKN PLC had been battling a hostile takeover bid since January, and Dana’s $6.1 billion offer earlier this month to buy the firm’s driveline business was seen as a mutually beneficial tie-up that would diversify Dana while allowing GKN to keep its independence.
But that deal fell apart on Thursday, as GKN shareholders narrowly approved a $11.4 billion takeover offer from Melrose Industries, the London-based turnaround specialist that GKN’s board had sought to block.
With Melrose now poised to take over GKN, Dana said it is unlikely its deal would be able to go forward.
“We are, of course, disappointed by today’s outcome and continue to believe Dana would be the best owner and operator of GKN Driveline,” Jim Kamsickas, Dana’s president and chief executive officer, said in a statement. “This has always been an opportunity, not a required or critical asset. Dana is a strong, thriving company, and we will continue our focus on the execution of our enterprise strategy, delivering for customers and remaining responsible stewards of our shareholders' capital.”
Officials at the Maumee automotive parts supplier had said the deal would have resulted in a combined company with 65,000 employees and annual sales of more than $14 billion. Not only would that have made Dana the Toledo area’s largest publicly traded company, it would have made Dana the world’s largest supplier of driveline parts.
While certainly disappointing to Dana, the deal’s collapse is not expected to have any impact on the company’s current operations, including its Maumee headquarters and its new axle plant in North Toledo.
Between other acquisitions — Dana has closed on four deals in the last two years — and winning new business, the firm’s revenues have trending upward.
In 2017, Dana reported sales of $7.2 billion, an increase of 24 percent from the prior year. Earlier this month, Dana officials had said they expect 2018 sales to be in the range of $7.75 billion to $8.05 billion. That guidance did not include any impact of the proposed GKN acquisition.
It’s also not terribly surprising that GKN shareholders voted in favor of selling the company to Melrose. Observers in the United Kingdom had been saying the vote’s outcome was a toss-up.
The situation between GKN and Melrose had been closely watched in the United Kingdom, where GKN is seen as a legacy company and an important defense contractor. British press have reported Melrose’s bid was the biggest hostile takeover attempt in the U.K. since Kraft took over Cadbury's nearly a decade ago.
As the voting deadline neared, Melrose and Dana were both active in publicly making their case to GKN’s shareholders.
Melrose characterized the deal with Dana as “a hasty fire sale,” and played on nationalistic pride, while Dana put out a point-by-point outline of why it believed the proposed combination with GKN Driveline offered the best value for GKN shareholders.
Dana also bumped up the cash component of the deal by $140 million — or 8.6 percent — making the entire offer worth about $6.3 billion, and said it was doubling its share repurchase program to $200 million.
In the end, the efforts from Dana and GKN weren’t enough to sway GKN’s shareholders.
GKN said Thursday that 52.4 percent of its shareholders had voted to accept the offer by the Thursday deadline. Melrose needed 50 percent, plus one share voted in their favor to win the takeover.
The GKN-Dana merger plan did have termination fee protections in place for both companies in the case that one of them would have backed out of the deal or otherwise caused it to fail for a variety of reasons. That included a $40 million termination fee to be paid to Dana by GKN in certain circumstances of the Melrose offer being accepted by GKN’s shareholders.
It was not clear Thursday if those circumstances were met. A spokesman for Dana said he would need more time to check into that issue.
Dana does not appear to be on the hook for any termination fees.
Dana’s stock closed the day at $25.76, up 3.1 percent. On the London exchange, GKN was up more than 6 percent to close at $631.30.
Contact Tyrel Linkhorn at tlinkhorn@theblade.com, 419-724-6134, or on Twitter @TyrelLinkhorn.
First Published March 29, 2018, 3:51 p.m.
