GKN and its potential buyer Melrose have both begun lobbying the engineering firm’s shareholders as the battle for control hots up.
The news has helped push GKN shares up 3.5% to 435p, compared with the current value of the Melrose offer of 422p a share, or more than £7bn.
On Friday GKN’s shares surged 25% as it rejected the proposed offer from turnaround specialist Melrose, saying it undervalued the company, and put forward its own plans to split the company into separate aerospace and automotive businesses.
GKN has been vulnerable since November when it issued a shock profit warning following problems at its US aerospace business, leading to the departure of proposed chief executive Keith Cummings before he had taken up the post. Anne Stevens, who was announced as GKN’s permanent chief executive on Friday, is now meeting investors to persuade them that the current management team is best placed to turn the business around.
Meanwhile, Melrose is telling GKN investors that the firm is undermanaged and lacks focus. Melrose chief executive, Simon Peckham, said: “GKN shareholders can elect to sell in the market right now … Or they 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.”
The meetings are expected over the next two weeks, with Melrose likely to unveil its formal offer after that.
Rival bidders such as private equity firms may gatecrash the bid, with Carlyle mentioned as a possible candidate.
Some analysts believe Melrose may have to raise its offer. Andrew Gollan at Berenberg said a 455p bid would be hard to reject: “We expect Melrose to return with a higher offer for GKN and for it to be accepted: There is an air of inevitability that GKN will end up being owned by Melrose. ”
Jonathan Hurn at Deutsche Bank said: “While … GKN’s strategy [finally offers] a road map for value creation, there is no hiding from the fact that Melrose’s track record of executing operational change has been far better than that of GKN.”
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