LONDON -- GKN and Dana agreed a $6.1 billion deal on Friday to merge GKN's automotive business with U.S.-based Dana as the British supplier looks to fend off a hostile bid from Melrose Industries.
GKN said it had agreed to combine its Driveline division with the Ohio-based maker of axles and driveshafts in a deal giving GKN shareholders a 47.25 percent stake in the enlarged, U.S.-listed group.
GKN will also receive $1.6 billion in cash from a merger it said “provides significantly greater value” than the cash-and-shares takeover offer that Melrose has made for all of GKN.
Although the combined group will become a UK public limited company called Dana Plc following the merger, it will remain headquartered in Ohio and will trade on the New York Stock Exchange.
GKN, led by CEO Anne Stevens, has been trying to fight off Melrose since January, when it spurned an unsolicited approach.
Melrose then turned hostile and took its offer, which at the time valued GKN at 7.4 billion pounds ($10.23 billion), directly to GKN's shareholders.
The deal with Dana gives GKN’s auto division an enterprise value, which includes debt, of $6.1 billion.
The merger will require approval by GKN shareholders, who will now have to weigh it against the merits of a Melrose takeover.
The Dana agreement could also now force Melrose to raise its bid.
GKN has previously set out plans to sell its powder metallurgy business. Taken together with the Dana deal, that would leave GKN solely focused on aerospace.
GKN shares were up 0.6 percent to 424.1 pence at 1240 GMT in London while Melrose stock was flat at 216.1 pence.