Melrose Industries PLC (LON:MRO) was upgraded by Deutsche Bank on Tuesday following the turnaround specialist’s hostile takeover of engineer GKN PLC (LON:GKN).
Deutsche Bank raised its rating on the stock to ‘buy’ from ‘hold’ and raised its target price to 275p from 227p.
Last Friday, Melrose said it had received acceptances from more than 90% of GKN shareholders for its £8bn cash and shares offer. It has sent formal compulsory acquisition notices to the GKN shareholders who are yet to accept the deal.
READ: Melrose closer to full ownership of GKN after receiving further shareholder acceptances
“We have long seen the scope for margin & cash improvement at GKN, with this potential comprehensively exposed by GKN in its defence,” said Deutsche Bank.
“We expect Melrose to adopt the best initiatives of (Project) Boost (GKN’s turnaround plan) and develop more as part of its strategy to deliver margin expansion.”
Melrose declared a narrow victory in its bid to buy GKN in March after receiving valid acceptances for its offer representing about 52.43% of the aerospace and automotive engineer's voting rights.
GKN had tried to sway shareholders against Melrose’s hostile bid and instead support its own restructuring plan, which included the sale of its automotive division to Dana Inc (NYSE:DAN).
Shares in Melrose rose 0.8% to 229.9p in morning trading.