Turnaround specialist Melrose appealed directly to GKN's investors to back its 7 billion-pound ($9.6 billion) takeover offer after the UK supplier's board rejected it.
GK, a supplier of components to automakers including Volkswagen Group and Ford Motor, disclosed on Friday that it had rebuffed 405 pence per share cash-and-stock offer made on Jan 8 as it set out plans to split its aerospace and automotive businesses. On Monday, the British engineering company indicated it would stand by this rejection.
GKN's shares were up 3.9 percent at 436.7 pence at 13:15 CET, sitting at the top of London's bluechip index, after Melrose said it planned to meet GKN shareholders and posted a presentation for GKN investors on its website.
In the presentation, Melrose described GKN's current position as an "overly complex and under-managed organization without focus which needs a fundamental change of culture and leadership."
"(GKN investors) ... can choose to combine their business with ours and have the majority share in what we are confident will be a business capable of significant value enhancement," Melrose CEO Simon Peckham said.
Melrose's business model is to buy engineering companies, improve their margins and resell them. It owns the diversified Nortek and the Brush electricity generating equipment businesses, and has a market value of 4.4 billion pounds.
GKN, which has a market value of 7.2 billion pounds, stuck to its rejection of any deal.
"Melrose's opportunistic offer to shareholders fundamentally undervalues our company and its prospects and would deprive our shareholders of the full benefits of the value that GKN intends to deliver," a GKN spokesman told Reuters in an email.
GKN has faced investor calls to split its business after its management failed to meet targets to improve profit and cash flow despite growing sales. Pressure has mounted further in the face of a profit warning in October and a writedown in November.
Setting out its own plans on Friday, GKN also named former Ford executive Anne Stevens as CEO, after a second large writedown at the aerospace division in November saw the departure of CEO-designate Kevin Cummings.
Market sources suggested companies such as Spirit AeroSystems or Triumph Group could be suitors for GKN's aerospace business.
City AM newspaper reported that U.S. buyout firm Carlyle was also looking at GKN.
While bankers have said that GKN's plan to split its business in two is likely to trigger bid interest in both businesses, analysts indicated that the Melrose approach might bring better value for investors.
"The key question is whether GKN's own strategic moves represent a more attractive proposition for investors than Melrose's ownership; we suspect not," Berenberg analysts said.
"We believe investors are unlikely to reject such an offer."
If it wins support for its bid, Melrose committed to exceeding GKN's own top-end group trading margin target of 10 percent, detailing a plan that includes restructuring the business and exiting some non-core areas such as powder metallurgy.
It also promised GKN investors "substantial capital returns" in "due course."
GKN, in rejecting Melrose's proposal, said it could improve cash generation under new leadership and maximize value for shareholders.