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Dowlais, the former automotive division of GKN, has agreed to be acquired by American Axle & Manufacturing in a cash-and-shares deal valuing it at about £1.16bn, as the two groups seek scale to survive the transition to electric vehicles.
Under the transaction, American Axle will acquire FTSE 250 group Dowlais for 85.2 pence a share, representing a premium of 25 per cent to the closing price on Tuesday. Shares in the London-listed group rose more than 10 per cent following the announcement.
The deal is part of a continuing outflow of companies from the London Stock Exchange, which last year suffered its biggest exodus since 2009.
In a statement, the two companies said the transatlantic combination would provide them with a stronger balance sheet and greater geographical footprint “as the industry transitions to alternate propulsion technologies”.
Following the merger, which will require a shareholder vote, Dowlais shareholders will own 49 per cent of the combined group with American Axle owning the rest.
The automotive parts industry has struggled as carmakers have been saddled by the higher costs of transitioning to EVs and meeting tougher regulatory requirements to cut emissions.
Dowlais, which makes parts for vehicles, was acquired by listed turnaround specialist Melrose Industries as part of its $11bn 2018 deal to buy struggling engineer GKN, and the business was spun off in the spring of 2023. Since its listing in London, its share value has more than halved.
Mark Fielding, an analyst at RBC Capital Markets, said: “The offer somewhat undervalues what is an attractive Tier 1 auto asset during the ongoing wider slump.”
