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Dana Merges with UK Automotive Supplier

March 12, 2018

Dana Inc. has signed an agreement to merge with the Driveline division of UK-based automotive system supplier GKN plc to create Dana plc, a global provider of driveline systems, in a move that will position it for the vehicle electrification market.

GKN Driveline is based in the United Kingdom and produces constant-velocity jointed driveshafts, all-wheel-drive systems, and electrified driveline solutions. The transaction also includes GKN's Off-Highway Powertrain Services business, which serves the off-highway power delivery and service market.

GKN Driveline has around 35,000 employees globally with 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).

With sales of around $13.4 billion, the new company will become a global leader in vehicle drive systems across light vehicle, commercial, and off-highway markets.

Dana plc will also be well-positioned for the vehicle electrification market with its core eDrive technology portfolio, according to the company. The deal also solidifies Dana’s presence in key markets, such as China.

"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.

The combined company will be based in the United Kingdom as Dana plc and will continue to trade on the New York Stock Exchange under the ticker symbol DAN.

The deal includes $1.6 billion in cash proceeds to GKN plc, the assumption of approximately $1 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% of the company with GKN shareholders owning 47.25%.

"We believe this transaction will result in a much stronger Dana, both strategically and financially, by taking advantage of the combined company's global scale, technology leadership, strong balance sheet, and attractive cash flow profile," said Jonathan Collins, executive vice president and chief financial officer of Dana. "In the near term, we expect our business to achieve best-in-class returns on capital and continue on the path to an investment grade credit profile."

Dana expects to complete the transaction, which is subject to shareholder and customary regulatory approvals, in the second half of 2018.

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