GKN Chairman Mike Turner said: "The board believes that Melrose's revised offer continues to fundamentally undervalue GKN and has no hesitation in unanimously rejecting it".
Melrose has said this will be the final offer as the acceptance deadline draws near.
Melrose has kept the cash part of the deal the same but raised the equity part from 1.49 new Melrose shares.
That is compared with the £7.4 billion bid previously put forward by Melrose, which is now offering GKN shareholders a total of £1.4 billion in cash and the chance to own a 60% stake in Melrose.
Shares in Melrose, a UK-based industrial turnaround specialist, fell 5.1 percent to 213.2 pence, dragging down the value of the bid to 441.3 pence.
GKN said in response it was evaluating the new offer.
Shares in Melrose were down 4.9 per cent at the time of writing, while GKN's stock was down more than two per cent.
Melrose had earlier Monday offered the equivalent of $11.2 billion or 9.1 billion euros - in response to GKN's announcement ahead of the weekend that it had agreed a tie-up of its automotive unit with United States auto parts group Dana.
The aerospace business has attracted a number of approaches at values "significantly' above what is reflected in the current share price, GKN said in its appeal to investors".
He added: "Melrose believes that this hasty and ill-thought-through transaction is prejudicial to GKN's shareholders".
FTSE 100-listed GKN said on Friday that it had agreed to combine its Driveline division with the Ohio-based maker of axles and driveshafts in a deal that gives GKN shareholders a 47.25 percent stake in the enlarged, US -listed group.
The company, which can trace its roots back to 1759, is attractive to buyers because of its involvement with growing aircraft programmes such as the A350 and the A320, and in cars, where it has been growing market share and supplies manufacturers including Fiat Chrysler and VW Group.
GKN issued profits warnings late a year ago following a hard period for its U.S. aerospace business - resulting in Melrose promising an operational and management overhaul of the company should its offer be accepted.