GKN has written to its shareholders urging them not to back Melrose Industries' hostile takeover bid, describing the turnaround specialist as an unsuitable steward of the company.


With a week until the 29 March deadline for shareholders to respond to Melrose's £8.1bn offer, GKN chairman Mike Turner told shareholders Melrose's offer was "wholly inadequate" compared with GKN's own strategy. His letter is the latest salvo in a bitter battle for the future of the FTSE 100 engineer.

GKN published the letter as Melrose said it had reached an agreement with GKN's pension scheme that would protect and improve the position of the scheme's members.

GKN proposes selling its automotive business to Dana Inc of the US, leaving a "world-class" aerospace company that will "positively re-rate" in line with peers, Turner said. GKN shareholders would have a stake in Dana, allowing them to benefit from combining the automotive businesses, GKN said.

Turner referred to Airbus's warning about GKN being owned by a company with a short-term investment plan. Airbus, GKN's biggest customer, said on 21 March it would be almost impossible to award new work to GKN under Melrose's ownership.

"We believe that Airbus is right to be concerned about such an approach and the comments from Airbus reinforce our firmly held belief that Melrose is not an appropriate owner of GKN," Turner said. "Indeed, throughout this process, Melrose has shown itself to be an unsuitable steward of your company with no long term plan."

GKN and Melrose have been locked in an increasingly rancorous battle since GKN's board rejected Melrose's approach in January. Melrose has said GKN's management is not up to the job of reviving the engineer's fortunes while GKN has branded Melrose a novice operator with no plan for the business.

GKN's pension scheme has been one of the main points of contention between the companies. Melrose said it had agreed with the trustees to inject about £1bn into the scheme if its takeover goes ahead.

Melrose's chairman, Christopher Miller, said: "The agreement with the GKN pension scheme Trustees is another concrete example of Melrose's exemplary track record with pension schemes and its desire to look after all stakeholders. This agreement would significantly improve the position of the members of GKN's pension schemes and is in line with our original plans for the business."

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