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Dana confirms plans for secondary London listing to help win over GKN investors

Last updated: 23:26 19 Mar 2018 AEDT, First published: 19:26 19 Mar 2018 AEDT

gkn driveline center
Some UK funds are subject to rules which prevent them from holding shares in US-listed companies

Dana Inc (NYSE:DAN), the US automotive group in talks to by GKN PLC’s (LON:GKN) driveline business, is to seek a secondary listing in London as it looks to win over shareholders in the British engineering giant.

Earlier this month, Ohio-based Dana agreed a deal which would see it buy GKN’s automotive division for US$6.1bn, but it was having trouble convincing investors to back the deal as well due to rules which prevent some UK funds from holding US stock.

“In order to provide more shareholders with an opportunity to hold stock of Dana plc, Dana today confirmed that it will seek a secondary 'standard listing' on the Main Market of the London Stock Exchange for Dana plc following the completion of the proposed combination,” read a statement on Monday morning.

Dana confirms divi payout as well

As an extra sweetener, the US firm also unveiled plans to give GKN investors a slice of its dividend, saying it would pay the current quarterly dividend of $0.10 per share to the enlarged shareholder base.

GKN – which has urged investors to back the deal - said the proposed merger would create a global leader in vehicle drive systems and electric propulsion that is expected to deliver US$235mln in annualized cost synergies by the end of the third year after completion.

Chief executive Anne Stevens said the “complementary nature of the two businesses and our shared commitment to R&D and long term investment creates a fantastic opportunity to build a world leading company and create meaningful shareholder value”.

She added: “The listing on the London Stock Exchange will make it possible for more of our shareholders to participate in the expected value creation opportunity from the combined Dana and GKN Driveline business.”

Other suitor sweetens offer

While GKN bosses are recommending the Dana offer which would leave it as a pure aerospace-focused business, they have openly – and regularly – rebuffed advances from UK turnaround investor Melrose Industries PLC (LON:MRO).

Last week Melrose put forward its third and final offer for GKN, which valued the company at £11bn. But GKN has advised shareholders to vote against the deal, saying it continues to “fundamentally undervalue” the firm.

One of the sticking points for investors with this bid is the fear that GKN’s pension scheme might be weaker under new ownership, but Melrose pledged on Monday to inject US$1.4bn to shore up the scheme.

Melrose also lowered the acceptance condition for its offer to 50% plus one share from 90%, increasing its chances of winning the company after public division among the investor base.

Dana shares rose 2.2% to US$27.01 in pre-market trading on Monday.

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