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Pension Funds

GKN shareholders approve Melrose takeover after pension fund trustees pushed for contributions

Shareholders of GKN PLC, Redditch, England, on Thursday approved its takeover by Melrose Industries PLC, London, the global engineering firm announced in a news release.

GKN pension fund trustees had pushed for Melrose to make contributions to the plans before the takeover moved forward.

The takeover, first proposed in January, had previously been rejected by GKN, citing that the offer severely undervalued the company. Also, GKN pension fund trustees had pushed for Melrose to make contributions to its 2.5 billion ($3.5 billion) pension funds, warning that Melrose's bid should account for the plans' funding ratio of 53.2% and put protections in place to offset any weakening that leverage creates for the pension covenant under the new owner, said documents published on the U.K.'s Work and Pensions Committee's website. A pension covenant is the employer's legal obligation and financial ability to support its pension funds now and in the future.

The board of GKN said 52.4% of shareholders had accepted the offer as of the deadline of 1 p.m. GMT on Thursday. Melrose Industries had first proposed acquiring GKN in January. In the months since, the trustees of GKN's GKN pension fund trustees had reached an agreement with Melrose on March 20 for contributions to be made to the pension funds should the acquisition be approved.

GKN had previously rejected Melrose's hostile takeover, claiming the company had significantly undervalued GKN in the bid.

Melrose agreed to make cash contributions to the pension funds of up to about 1 billion, comprising an initial 150 million contribution. Melrose Industries has 525 million in pension assets.

Nicola Foster, spokeswoman at GKN, Guy Stainer, investor relations director at GKN, and Charlotte McMullen and Sophie Arnold, Melrose spokeswomen, were not available to provide further information.