GKN PLC (LON:GKN) saw its shares soar 20% higher in early trading as the blue chip automotive and aerospace components company revealed it has rejected a takeover proposal and also unveiled plans to separate its businesses.
In a statement, the FTSE 100-listed group said that on 8 January 2018 it received “a preliminary and unsolicited” takeover proposal” from Melrose Industries PLC (LON:MRS) at a price of 405p per share, comprising 80% in new Melrose shares and 20% in cash.
READ: GKN shares descend as it ousts incoming CEO and warns of further write-off to US aerospace arm
GKN said after considering the proposal it has unanimously rejected it, having concluded that the offer approach is “entirely opportunistic and that the terms fundamentally undervalue the Company and its prospects.”
At the same time, having undertaken an intensive analysis of the economic benefits and costs involved, GKN said it intends to separate its automotive and aerospace businesses, saying the move recognises “the strategic optionality for shareholders in having separate companies with distinct investment profiles and capital allocation policies.
It added: “The timing of the separation will be determined by the need to maximise the economic benefits and minimise the costs associated with separation.”
Melrose sees "significant operational and commercial benefit"
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.”
The predator added: “GKN announced today its intention to separate the businesses. Melrose believes that shareholder value would be maximised by it significantly improving the businesses prior to any separation.
“The potential acquisition represents a significant opportunity for Melrose to execute on its strategy of maximising inherent value of specialised industrial businesses it owns.”
Interim boss takes control
GKN also announced that Anne Stevens, currently its interim chief executive, has agreed to take over as the group’s new chief executive with immediate effect.
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.
The firm also said its fourth quarter trading was in line with expectations and it therefore continues to expect 2017 management profit before tax to be slightly ahead of 2016’s £678mln outcome before the additional working capital write-off in North American Aerospace announced on 16 November 2017.
GKN said the one-time write-off and associated costs are still estimated to be between £80mln and £130mln, albeit nearer the upper end of that range.
-- Adds Melrose statement, updates share prices --