GKN drivelineUS tier one supplier Dana and British engineering company GKN have agreed to bring their two powertrain businesses together in a $6.1 billion deal.

Dana and GKN said the combined business, which had pro forma sales of $13.4 billion last year, would be the global leader in vehicle drive systems across all three major mobility markets: light vehicles, commercial vehicles and off-highway.

The new entity’s core eDrive technology portfolio will enable it to “capitalise on electrification opportunities in a rapidly changing market with significant growth potential,” according to Dana, whose president and CEO James Kamsickas said the new company would secure a leading position in electric propulsion “which we see as the future of vehicle drivetrains.”

The companies have a long history of partnering each other, feature similar cultures and have a deep understanding of their customers’ long-term requirements, he added.

Dana’s shareholders will hold 52.75% of the new entity, with GKN shareholders holding 47.25%. Though the new company, Dana PLC, will be UK-listed, its headquarters will be in Maumee, Ohio – the same city as Dana.

The proposed transaction involves $1.6 billion in cash being transferred to GKN, the assumption of approximately $1.0 billion in pension liabilities, and 133m new Dana shares being issued to GKN’s shareholders, valued at around $3.5 billion.

Dana expects to complete the transaction, subject to regulatory and shareholder approvals, in the second half of this year.

GKN’s corporate strategy includes divesting its driveline and powder metallurgy businesses to focus on its aerospace division.

Meanwhile, GKN in its entirety has become subject to an unsolicited £8.1 billion ($11.2 billion) offer from turnaround specialist Melrose Industries. GKN’s directors have urged shareholders to reject the bid on the grounds that it is opportunistic and fundamentally undervalues the company.