Cleveland, Ohio – GKN Driveline, the automotive drivetrain portion of GKN plc, has agreed to merge with Dana Inc., creating a massive automotive and truck supplier that can provide drivetrain and suspension components to most vehicles.
The $6.1 billion deal tops a $10.2 billion hostile bid from a British private equity company Melrose plc for all of GKN – a company with automotive, aerospace, and powdered metal operations.
GKN has been looking for buyers for its automotive driveline business and powdered metallurgy operations for nearly a year to it can focus on its aerospace business. However, the company’s board rejected a friendly offer from Melrose for being too low and had recommended against the hostile offer.
The deal with Dana effectively creates a new company, Dana plc, that breaks down as:
- Dana pays GKN’s parent company (GKN plc) $1.6 billion in cash
- Dana takes over $1 billion in pension liabilities from GKN plc
- Dana Inc. issues $3.5 billion of stock in the new company (Dana plc) to GKN plc shareholders
- GKN plc shareholders will hold 47.25% of Dana plc
- Dana Inc. shareholders hold 52.75% of Dana plc
The Dana cash payments, liability absorbtion, and new shares create a $6.1 billion total price tag for the deal. The drivetrain business made up slightly less than half of GKN’s 2017 sales and 47% of its pre-tax profits, so the Dana deal values GKN plc at roughly $12 billion.
"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," says Dana President and CEO James Kamsickas.
Mike Turner, Chairman of GKN, says, “The synergies between these two businesses and our complementary product portfolios make this a great deal for GKN shareholders. Following the transaction, GKN shareholders will own 47% of a $14 billion revenue, global automotive group and will retain ownership of GKN’s outstanding remaining businesses.”
The deal is subject to standard regulatory clearances and must win favor from GKN shareholders. Melrose has until March 15, 2018, to submit a new bid if it hopes to top the Dana offer.
About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 17 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.