Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

GKN lays out strategic plan as Melrose shareholders approve hostile takeover bid

Melrose shareholders approved the company's takeover bid for GKN on Thursday and the European Commission has given it anti-trust clearance
GKN
GKN expects to improve the cash position of the automotive business

GKN PLC (LON:GKN) has provided further details on its strategic plan as part of its quest to convince shareholders to vote against a hostile takeover offer from Melrose Industries PLC (LON:MRO).

The engineer said its so-called ‘Project Boost’ transformation plan will “fundamentally improve” the cash position and margins of its automotive division, GKN Driveline.

By the end of 2020, the company expects Driveline to achieve £153mln of recurring annual cash savings and is targeting a trading margin of more than 9.5%.

It plans to automate and digitise operations within Driveline, which is expected to improve productivity, quality and safety.

GKN is splitting its automotive and aerospace division into two.

Melrose shareholders approve GKN bid

GKN has been trying to reassure shareholders of its ability to turnaround the business as it tries to fend off a hostile takeover approach from turnaround specialist Melrose.

Melrose offered £7.4bn for GKN in January but the engineer has recommended shareholders vote against the deal because it believes it undervalues the firm.

Shareholders in Melrose approved the deal on Thursday and the European Commission has given it anti-trust clearance.

eDrive revenues expected to rise

GKN said a strong performance in its electric driveline unit, eDrive, will boost results with revenues forecast to reach £500mln by 2022.

The division, which makes parts for BMW and Volvo, has a £2bn order book from global original equipment manufacturers.

READ: GKN lifts sales forecast for electric car unit as it fights off Melrose hostile takeover

In China, its joint venture with Hasco –Shanghai GKN Huayu Driveline Systems – will implement a separate transformation plan aimed at maintaining its strong margins. 

GKN says strategic plan on track 

The group said GKN Driveline now has the “capability and the strategic focus to capitalise on its investments and deliver substantial margin improvements and cash flow to shareholders”.

"Our Driveline business is perfectly positioned to take advantage of the changing automotive market,” said GKN chief executive Anne Stevens.

“We will continue to develop and deliver the technologies that will enable our customers to succeed while realising the full value of our business."

GKN continues to fight against Melrose bid

The news comes after bosses of GKN and Melrose addressed lawmakers at a UK parliamentary hearing on Tuesday amid concerns about the proposed takeover.

READ: GKN tells lawmakers it has received many approaches since Melrose hostile bid

Stevens told MPs that GKN has received many approaches from other companies since the offer from Melrose.

Melrose chief executive Simon Peckham tried to soothe worries that the company would break up GKN into pieces before selling it off. He told lawmakers Melrose would not sell GKN’s protected military assets to anyone who is not an appropriate buyer.

View full GKN profile View Profile

GKN Timeline

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use