Dana Corp.'s board of directors has rejected an unsolicited tender offer from ArvinMeritor, signaling what many believe will be a long and bitter battle for control of the company.
Dana filed a Schedule 14D-9 with the Securities and Exchange Commission recommending that its shareholders not accept the $15 per share tender offered made by ArvinMeritor on July 9.
Meanwhile, ArvinMeritor responded in writing, saying "We believe Dana's board and management team has failed to seize this unique opportunity to maximize value for its shareholders."
Dana's board of directors said the ArvinMeritor offer, valued at $2.2 billion was "inadequate, from a financial point of view," noting that Dana's restructuring and transformation efforts have already started to show results and the anticipated improvement in financial performance aren't yet reflected in the stock price.
"There is virtually no rationale for accepting this offer, which represents inadequate value and a high level of risk for shareholders," said Dana Chairman and CEO Joe Magliochetti. "We are confident that with the substantial completion of our restructuring, the critical momentum we are beginning to achieve in our transformation process, our market leadership and the expected cyclical upward turn in our heavy-duty markets, we are positioned to outperform our peers as the industry recovers. We are confident that as we go forward, the benefits of our restructuring will enhance shareholder value."
Dana's board also said the proposed transaction "raise serious antitrust issues and is very likely to attract intensive scrutiny from government antitrust authorities, which may result in litigation to block the offer."
They noted that Dana and ArvinMeritor "are the only substantial North American producers of axles, driveshafts and foundation brakes for medium and heavy duty trucks, with combined market shares ranging from 80% to 100%."
The recommendation further argued that ArvinMeritor would need to arrange substantial financing to consummate the offer which could bring the company's pro forma debt-to-capital ratio to approximately 88%, "among the highest in the automotive supply industry." Moreover, it said that the offer is "highly conditional, which creates significant uncertainty that the offer could ever be completed."
ArvinMeritor responded in a written statement, saying, "Our offer permits Dana's shareowners to realize an attractive cash price for their shares today without bearing the risks of Dana's long-term restructuring efforts."
ArvinMeritor also indicated its willingness to negotiate. "We believe Dana's board and management team has failed to seize this unique opportunity to maximize value for its shareholders. As we have indicated previously, if Dana's board is willing to work with us to consummate a transaction quickly, we may be prepared to analyze further whether a higher value is warranted."
ArvinMeritor also noted that, instead of the all-cash offer on the table, they would be willing to consider a mix of cash and stock.
ArvinMeritor did not specifically address other points raised by Dana's board, calling them a "litany of manufactured reasons to oppose this combination" and noting that "not one issue" raised by the rejection recommendation couldn't be resolved.
The recommendation wasn't a surprise. ArvinMeritor said when announcing the tender offer that it was taking the matter to the shareholders after Dana's board rejected several attempts to discuss a buyout. Although shareholders have the ultimate say, Dana's management can make the process long and difficult. One strategy would be to activate a "poison pill" designed to dilute the shareholder base in a takeover attempt, making a buyout extremely costly. Some analysts have speculated that it may take more than a year for the matter to be resolved.
The hostile takeover raises yet-to-be answered questions regarding the fate of Roadranger, the Dana/Eaton joint marketing venture formed in 1998 after Dana bought Eaton's axle and brake division and Eaton bought Dana's Spicer Clutch. Neither Dana nor ArvinMeritor responded to questions about RoadRanger.
In a recent conference with analysts to discuss Eaton's second quarter results, Chairman/CEO Sandy Cutler said he couldn't discuss the proposed acquisition but added that they don't feel it imposes a material threat to Eaton's truck components business because of protections in the alliance agreement.
Dana filed a Schedule 14D-9 with the Securities and Exchange Commission recommending that its shareholders not accept the $15 per share tender offered made by ArvinMeritor on July 9.
Meanwhile, ArvinMeritor responded in writing, saying "We believe Dana's board and management team has failed to seize this unique opportunity to maximize value for its shareholders."
Dana's board of directors said the ArvinMeritor offer, valued at $2.2 billion was "inadequate, from a financial point of view," noting that Dana's restructuring and transformation efforts have already started to show results and the anticipated improvement in financial performance aren't yet reflected in the stock price.
"There is virtually no rationale for accepting this offer, which represents inadequate value and a high level of risk for shareholders," said Dana Chairman and CEO Joe Magliochetti. "We are confident that with the substantial completion of our restructuring, the critical momentum we are beginning to achieve in our transformation process, our market leadership and the expected cyclical upward turn in our heavy-duty markets, we are positioned to outperform our peers as the industry recovers. We are confident that as we go forward, the benefits of our restructuring will enhance shareholder value."
Dana's board also said the proposed transaction "raise serious antitrust issues and is very likely to attract intensive scrutiny from government antitrust authorities, which may result in litigation to block the offer."
They noted that Dana and ArvinMeritor "are the only substantial North American producers of axles, driveshafts and foundation brakes for medium and heavy duty trucks, with combined market shares ranging from 80% to 100%."
The recommendation further argued that ArvinMeritor would need to arrange substantial financing to consummate the offer which could bring the company's pro forma debt-to-capital ratio to approximately 88%, "among the highest in the automotive supply industry." Moreover, it said that the offer is "highly conditional, which creates significant uncertainty that the offer could ever be completed."
ArvinMeritor responded in a written statement, saying, "Our offer permits Dana's shareowners to realize an attractive cash price for their shares today without bearing the risks of Dana's long-term restructuring efforts."
ArvinMeritor also indicated its willingness to negotiate. "We believe Dana's board and management team has failed to seize this unique opportunity to maximize value for its shareholders. As we have indicated previously, if Dana's board is willing to work with us to consummate a transaction quickly, we may be prepared to analyze further whether a higher value is warranted."
ArvinMeritor also noted that, instead of the all-cash offer on the table, they would be willing to consider a mix of cash and stock.
ArvinMeritor did not specifically address other points raised by Dana's board, calling them a "litany of manufactured reasons to oppose this combination" and noting that "not one issue" raised by the rejection recommendation couldn't be resolved.
The recommendation wasn't a surprise. ArvinMeritor said when announcing the tender offer that it was taking the matter to the shareholders after Dana's board rejected several attempts to discuss a buyout. Although shareholders have the ultimate say, Dana's management can make the process long and difficult. One strategy would be to activate a "poison pill" designed to dilute the shareholder base in a takeover attempt, making a buyout extremely costly. Some analysts have speculated that it may take more than a year for the matter to be resolved.
The hostile takeover raises yet-to-be answered questions regarding the fate of Roadranger, the Dana/Eaton joint marketing venture formed in 1998 after Dana bought Eaton's axle and brake division and Eaton bought Dana's Spicer Clutch. Neither Dana nor ArvinMeritor responded to questions about RoadRanger.
In a recent conference with analysts to discuss Eaton's second quarter results, Chairman/CEO Sandy Cutler said he couldn't discuss the proposed acquisition but added that they don't feel it imposes a material threat to Eaton's truck components business because of protections in the alliance agreement.
media brand
0 Comments
See all comments