February 7, 2018 / 6:25 PM / 10 months ago

UPDATE 1-Britain looking closely at Melrose bid for GKN - PM May

(Updates with Melrose comment)

By Ben Martin and William James

LONDON, Feb 7 (Reuters) - The hostile takeover pursuit of engineering company GKN by Melrose Industries is receiving close attention from the British government, Prime Minister Theresa May said on Wednesday.

The bid by the turnaround specialist has escalated into a war of words between the two UK companies and prompted the Unite union to warn that a deal could threaten jobs.

Melrose's cash-and-shares hostile offer values GKN at about 7 billion pounds ($9.7 billion) but has been rejected as "derisory" by Anne Stevens, chief executive of the aerospace and automotive parts business.

May said the government's business department "will be looking closely" at the proposed deal and has been following events.

The prime minister was responding to a question in parliament from lawmaker Jack Dromey, who asked whether the government would use its powers to block what he described as an "unwanted" takeover of GKN.

"I can assure him that I, and the government as a whole, will always act in the UK national interest," May said.

Melrose has swooped on GKN after the FTSE 100 aerospace and automotive parts company was left vulnerable following two profit warnings in October and November that sent its shares tumbling.

Stevens, who took over as GKN's new chief executive last month, has said she plans to separate the company's two main businesses to boost value for shareholders, as an alternative to a deal with Melrose.

GKN did not respond to a request for comment on May's remarks.

A Melrose spokesman said: "We welcome any and all opportunities to explain to government why we believe a merger with GKN will create an industrial powerhouse of which the UK can be rightly proud." ($1 = 0.7216 pounds) (Reporting by William James and Ben Martin; Editing by Elisabeth O'Leary and Dale Hudson)

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