REDDITCH firm GKN has rejected an improved £7.4 billion takeover bid from Melrose Industries, just a week after turning down their initial approach.

Melrose, which specialises in buying and rejuvenating manufacturers, claimed its bid would “re-energise and re-purpose” the embattled engineer.

But GKN say the formal cash-and-stock offer was “effectively unchanged” from last week’s initial approach, which it rejected for undervaluing the firm.

The bid marks the UK’s biggest unsolicited takeover approach since Kraft’s controversial offer for Cadbury in 2009.

The offer values GKN at 430.1p a share, while Melrose is also proposing to take on around £1 billion of debt.

But GKN pointed out that the terms of the approach remain unchanged, with the offer only rising by 6.2 per cent as Melrose shares are now worth more having increased since the takeover interest first emerged.

Anne Stevens, who was appointed permanent chief executive of GKN last week, said: “We believe GKN’s current owners should retain all the benefits of the clear upside potential in GKN, rather than handing almost half of this upside to Melrose and its shareholders.

“We have already stated that the terms of Melrose’s offer fundamentally undervalue the company and we are actively engaging with shareholders to explain how our transformation plan will provide value.”

GKN, which makes wing tips for Airbus and parts for car giants including Mercedes and Jaguar Land Rover, advised shareholders to “take no action” and said it would unveil more details soon to further explain plans to overhaul the business.

Melrose said the tie-up would create a group worth £11 billion – making it one of the largest in the UK.

Simon Peckham, chief executive of Melrose, said: “The real value uplift will come from merging the interests of the two sets of shareholders and creating a business valued at approximately £11 billion today, of which GKN holders will own the majority, including Nortek, our US business which is trading strongly.”