Published: Mon, January 15, 2018
Medicine | By Daryl Nelson

GKN - Offer rejected, Automotive and Aerospace to separate

GKN - Offer rejected, Automotive and Aerospace to separate

By 8.30am, GKN shares were up 20.7%, or 68.8p at 401.5p, while Melrose shares gained 5.7% or 12.3p at 227,3p.

Analysts at Jefferies said the company could be worth as much as 504p a share.

In an announcement to the London Stock Exchange on Friday, GKN confirmed that it received a "preliminary and unsolicited proposal from Melrose to acquire the entire issued, and to be issued, share capital of GKN at a price of 405p per share".

A bid battle is now likely as Melrose, which specialises in buying struggling businesses, turning them round and selling them at a profit with the proceeds given back to shareholders, will pursue its interest despite GKN's opposition.

GKN said: "The proposal is entirely opportunistic and that the terms fundamentally undervalue the company and its prospects". This represents 1.49 new Melrose shares and 81 pence in cash for each GKN share.

It added that "the proposal would materially dilute the exposure of GKN shareholders to the meaningful upside opportunities that the Board believes are present within the company".

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GKN, which used to be known as Guest, Keen and Nettlefolds and traces its history back to 1759, has struggled in recent years and its profit warning came after a downturn in its USA aerospace business.

The group ousted Kevin Cummings, GKN's aerospace head, who was due to take over from incumbent chief executive Nigel Stein in January. "After a successful turnaround of The Ford Motor Company's businesses in Mexico, Canada and South America, she was appointed as chief operating officer for the Americas where she developed the transformation plan for Ford's U.S. business".

GKN also announces that Anne Stevens, now its interim chief executive, has agreed to take over as the group's new chief executive with immediate effect. According UK takeover rules, Melrose now can make a firm offer by February 9 or walk away for six months.

By separating its aerospace and automotive units "the Board believes that shareholder value will be maximised by setting distinct strategic, operational and financial objectives for the businesses, with clear focus, accountability and better aligned incentive plans", GKN said.

The engineering group also announced the appointment of interim boss Anne Stevens as the group's permanent chief executive.

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