GKN shares surge on Melrose takeover approach

Frederick Owens
January 15, 2018

GKN shares were gaining around 26 percent in the morning trading in London.

Shares in the company were up almost 24 per cent at 412.2p at the time of writing.

GKN (GKN) shares jumped 26.3% to 420.1p after the group rejected a 405p per share approach from Melrose, instead setting out plans to split its business in two to unlock value for shareholders.

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.

The proposal included a breakdown of the funding of the deal, whereby 80% would be in new Melrose shares and 20% in cash.

GKN said that under the terms of the proposal, GKN shareholders would have held around 57% of the enlarged company, plus 81p in cash, taking the 218p share price of Melrose on 5 January into account.

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 United States aerospace business.

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The downturn led to the dismissal of the Aerospace head, Kevin Cummings, who had been due to takeover as the future group chief executive in January.

Meantime, GKN believes that value for its shareholders will be "maximised" by its separation of its aerospace and automotive divisions in order to set "distinct strategic, operational and financial objectives for the [two] businesses, with clear focus, accountability and better-aligned incentive plans".

The company said on Friday that it rebuffed an "opportunistic" and "unsolicited" proposal from the turnaround specialist as it undervalued GKN.

"The separation of the automotive and aerospace units has been on the cards for years, with little obvious cross over between the two businesses".

Melrose has until 9 February to either make a firm bid or walk away.

GKN said earlier this month it has now appointed Anne Stevens to run the group on a permanent basis after she took up the role of interim CEO in November.

Further, GKN said its fourth-quarter trading was in line with expectations and that it continues to expect 2017 profit before tax to be slightly ahead of 2016.

Other reports by Free-Prsite

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