GKN reject takeover bid that values the company at £7bn

Andrew Cummings
January 13, 2018

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.

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

Regarding the rejection of the Melrose offer, GKN said the offer is entirely opportunistic and that the terms fundamentally undervalue the company and its prospects.

One shareholder in Melrose, who also previously used to own stock in GKN, said "good assets, bad management" had always been the story at GKN.


"The proposal would materially dilute the exposure of [our] shareholders to the meaningful upside opportunities that the board believes are present within the company", says GKN.

In its own statement, released mid-morning Melrose said it believes that there would be "significant operational and commercial benefits arising from Melrose's ownership of GKN's businesses, reversing a history of existing GKN management not delivering on margin targets".

Under the stock market rules, Melrose is now required to either announce a firm offer by 5pm on 9 February, or announce that it is no longer interested. "The timing of the separation will be determined by the need to maximise the economic benefits and minimise the costs associated with separation".

"The separation of the automotive and aerospace units has been on the cards for years, with little obvious cross over between the two businesses". "Portfolio rationalisation of our non-core product segments will also be a priority", says GKN.


GKN also said that Anne Stevens, now Interim Chief Executive, has agreed to become the Group's new Chief Executive with immediate effect. She has previously served as chief executive of speciality metals producer Carpenter Technology and as a senior executive at automotive manufacturer Ford.

The group said Stevens has been leading an ongoing and wide-ranging internal review of all GKN's businesses which has culminated in the development of a transformation plan to improve significantly performance.

Following fourth-quarter trading "in line with expectations", GKN foresees a full-year pre-tax profit "slightly ahead" of the £678 million recorded in 2016. That write-off, associated with GKN's United States aerospace business, will be "nearer the upper end" of an £80-130 million range, GKN indicates.


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