Maumee, Ohio-headquartered Dana Incorporated announced on March 9 that it has signed definitive agreements to combine with the Driveline division of GKN plc to create Dana plc, a global leader in driveline systems. The total consideration is composed of $1.6 billion in cash proceeds to GKN plc, the assumption of approximately $1.0 billion of net pension liabilities, and 133 million new Dana plc shares issued to GKN's shareholders, valued at approximately $3.5 billion (based on Dana's share price as of March 8, 2018).
Under terms of the agreements, Dana shareholders will own approximately 52.75 percent of the company with GKN shareholders owning 47.25 percent. The combined company will be domiciled in the United Kingdom as Dana plc and will continue to trade on the New York Stock Exchange under the ticker symbol DAN.
The $6.1 billion transaction is aimed at repelling a hostile takeover from investment group Melrose Industries Plc. GKN has been fighting off Melrose since January, when it spurned an unsolicited takeover bid.
"This transformative and strategic transaction solidifies Dana as a world leader in vehicle drive systems and establishes a leading position in electric propulsion, which we see as the future of vehicle drivetrains," said James Kamsickas, president and CEO of Dana. "We have a long history of partnering with GKN, and the companies possess similar cultures and exceptionally talented people. Our highly complementary businesses share a deep understanding of our customers' long-term requirements. We look forward to welcoming GKN Driveline into the Dana family and to delivering value and growth to our shareholders."
With pro forma sales of approximately $13.4 billion in 2017, the company will be the global leader in vehicle drive systems across all three major mobility markets – light vehicle, commercial vehicle, and off-highway.
Core eDrive technology portfolio uniquely positions the company to capitalize on electrification opportunities in a rapidly changing market with significant growth potential.
The combined entity will provide global coverage to all major customers with an enhanced product portfolio, balanced end markets, and a diverse geographic presence – strengthening the company's presence in key markets such as China.
The combined company will have a strong balance sheet, and the transaction is expected to result in $235 million of annual cost synergies within three years and be accretive to earnings in the first full year.
Keith Wandell, non-executive chairman of the Dana Board of Directors, said, "This combination of global leaders results in a unique platform benefiting from the key trends of electrification and global emerging market growth, underpinned by substantial synergies. We look forward to welcoming our new board members and shareholders to create true value for all of our stakeholders."
Headquartered in the United Kingdom, GKN Driveline has built market leadership positions in three light-vehicle product segments – constant-velocity jointed driveshafts, all-wheel-drive systems, and electrified driveline solutions. The business has expertise across mechanical systems, electronic and software control, and particularly vehicle integration. The transaction also includes GKN's Off-Highway Powertrain Services business, an expert in off-highway power delivery and service.
With approximately 35,000 employees, GKN Driveline has operations in 23 countries and has 61 manufacturing locations, including one of the largest driveline businesses in China via its joint venture, Shanghai GKN Huayu Driveline Systems (known as SDS). In 2017, the business generated consolidated sales of approximately $6.2 billion.