By Ben Martin
March 9 (Reuters) - GKN and Dana Incorporatedagreed a $6.1 billion deal on Friday to merge GKN'sautomotive business with U.S.-based Dana as the British firmlooks to fend off a hostile bid from Melrose Industries.
GKN said it had agreed to combine its Driveline divisionwith the Ohio-based maker of axles and driveshafts in a dealgiving GKN shareholders a 47.25 percent stake in the enlarged,U.S.-listed group.
FTSE 100-listed GKN will also receive $1.6 billion in cashfrom a merger it said “provides significantly greater value”than the cash-and-shares takeover offer that Melrose has madefor all of GKN.
Although the combined group will become a UK public limitedcompany called Dana Plc following the merger, it will remainheadquartered in Ohio and will trade on the New York StockExchange.
GKN, led by chief executive Anne Stevens, has been trying tofight off Melrose since January, when it spurned an unsolicitedapproach.
Melrose then turned hostile and took its offer, which at thetime valued GKN at 7.4 billion pounds ($10.23 billion), directlyto GKN's shareholders.
The deal with Dana gives GKN’s auto division an enterprisevalue, which includes debt, of $6.1 billion.
The merger will require approval by GKN shareholders, whowill now have to weigh it against the merits of a Melrosetakeover.
The Dana agreement could also now force Melrose to raise itsbid.
GKN has previously set out plans to sell its powdermetallurgy business. Taken together with the Dana deal, thatwould leave GKN solely focused on aerospace.
GKN shares were up 0.6 percent to 424.1 pence at 1240 GMT inLondon while Melrose stock was flat at 216.1 pence.
($1 = 0.7233 pounds)(Reporting by Ben Martin in London; editing by Adrian Croft andJason Neely)