MAUMEE, Ohio—Dana Inc. continues to up the ante for GKN P.L.C.'s Driveline division in an effort to hold off a takeover bid from Melrose Industries P.L.C.
The Maumee-based automotive supplier of driveline components said in a March 26 release that it increased the cash element of its offer by $140 million, increasing it to $1.77 billion total and raising the overall value of the offer to more than $6.2 billion. Dana also will double the size of its share repurchase to $200 million.
"Today's announcement demonstrates our support for investors following a series of productive meetings where the many benefits of the combination have become ever more apparent," Jonathan Collins, Dana executive vice president and chief financial officer, said in a statement. "We are clearly enhancing the superior value this combination offers to GKN shareholders. This strategic transaction is driven by powerful industrial logic and offers a unique opportunity for shareholders to participate in the creation of a global leader in vehicle drive systems and electric propulsion."
If the merger is successful, Dana Inc. and GKN Driveline will combine to form Dana P.L.C.—of which Dana shareholders will own 52.75 percent and GKN's shareholders the remaining 47.25 percent. The deal would create the world's largest supplier of driveline components.
In addition to the $1.77 billion cash consideration to GKN, Dana is taking on $1 billion in net pension liabilities and will issue about 133 million new shares of the combined company worth about $3.5 billion.
This is the second time Dana has upped its offer for GKN Driveline in response to Melrose since the original deal was announced on March 8. Dana said on March 19 that it plans for a secondary listing of Dana P.L.C. on the London Stock Exchange, which according to the firm would allow for more GKN shareholders to benefit from the Dana-GKN Driveline combination.
Dana added that it will continue to pay a quarterly dividend of 10 cents per share to its expanded shareholder group.
"The clear message from shareholders is that they want to be able to hold stock in a combined Dana P.L.C., which will be a global leader in vehicle drive systems and electrical propulsion," Collins said in a March 19 statement. "Through a secondary listing on the London Stock Exchange, existing shareholders of both Dana and GKN will have an opportunity to share in the success of the new company, including value created through the delivery of $235 million in annual synergies."
Melrose made what it deemed a "revised and final offer" to acquire all of GKN for about $11.2 billion. While GKN shareholders have until March 29 to accept the offer, the GKN board "unanimously rejected" the offer in a March 12 statement.
Since the offer was declared "final," it cannot be increased under British takeover rules. But Melrose has since offered to contribute about $1.4 billion toward GKN's pension fund.
Dana, as part of the proposed merger with GKN Driveline, will take on about $1 billion of net pension liabilities, in addition to sending about $1.6 billion in cash to GKN and issue 133 million new Dana P.L.C. shares to GKN's shareholders, valued at about $3.5 billion.
The bidding war has not stopped Dana from increasing its 2018 full-year financial targets—upping its sales projections by $300 million to $8.05 billion, but did not provide a guidance for its net income.
"Our continued strong financial performance—driven by our organic and inorganic sales growth and the execution of our synergy plan related to recent acquisitions—has provided us with increased confidence in our outlook for 2018, and further solidified our trajectory toward achieving our long-term targets," Collins said in a statement.
In separate moves, Dana secured two contracts—one to supply driveline components for the Chevrolet Silverado Class 4, 5 and 6 chassis cab trucks; and the other to supply axles for the next-generation Jaguar and Land Rover programs.
The Jaguar/Land Rover contract is worth more than $424 million with Dana investing about $30 million to produce the axles at its facility in Birmingham, England.
"We are proud to be a trusted long-term partner with Jaguar Land Rover," James Kamsickas, Dana president and CEO, said in a statement. "Throughout our 70-year relationship, we have demonstrated a commitment to understanding their unique requirements, allowing us to deliver superior performance for the luxury-vehicle segment. These new contracts with Jaguar Land Rover are a testament to Dana's commitment to engineering and our ability to meet the demands of the market."
Financial details of its contract with Chevrolet were not disclosed, but Dana said the conventional-cab trucks will be available in both two-wheel-drive and four-wheel-drive configurations and will feature Spicer S-Series drive axles, Spicer D-Series steer axles, Spicer front drive steer axles and Spicer Life Series driveshafts.
"Chevrolet's commitment to excellence for customers mirrors Dana's dedication to providing the best products available for ease, efficiency, strength, and reliability for customers," Kamsickas said. "The medium-duty truck industry requires maximum maneuverability, reduced maintenance, and quieter vehicle operation. Dana's longstanding relationship with General Motors has allowed us to work together to develop solutions designed to meet the specific needs of truck owners, such as ease of upfitting and service, regardless of the vehicle class."