GKN Rejects Melrose Offer; To Separate Businesses; Names Stevens CEO; Stock Up

Adjust Comment Print

Shares in GKN, which makes wing tips for Airbus planes and parts for Porsche cars, jumped more than a quarter to 423p.

Under the Project Boost programmeme, GKN plans to improve its cash and profit by sharpening its productivity, capital allocation and procurement activity. Those calls became louder after a profit warning in October, which was sparked by the difficulties at its aerospace business.

In an announcement to the London Stock Exchange on Friday, GKN confirmed that it received a "preliminary and unsolicited proposal from Melrose to acquire the entire issued, and to be issued, share capital of GKN at a price of 405p per share".

Reuters noted that the offer sent shares in GKN up 20% in early Friday trading in London.

The 737 MAX 9 which can carry up to 220 passengers is the second of three variants of the popular single-aisle model. Pic Stephen Brashear  Getty
Image GKN's aerospace customers include Boeing

On the appointment of Stevens as new chief executive, the firm's chairman Mike Turner said she "has the track record to transform GKN", pointing to her "successful turnaround" of The Ford Motor Company's Mexico, Canada and South America businesses and senior roles at Carpenter Technology and Lockheed Martin.

In November, the company announced that its CEO designate Kevin Cummings was leaving the company with immediate effect following a profit warning brought about by difficulties on USA aerospace operations.

In accordance with the UK's takeover rules, Melrose has until 5.00pm on 9 February 2018 to counter with a new offer for GKN.

The GKN board described the offer as "opportunistic", and said that it "fundamentally" undervalued the company. The company was founded and floated on the stock market in 2003 as a cash shell by three businessmen, Christopher Miller, David Roper and Simon Peckham, who put about £3m into the business. GKN shareholders would have ended up with a 57% stake in the combined business.

It adds that all product segments will have "stretching targets" and that "a much stronger performance and accountability culture will be instilled throughout the business".

"GKN is a world leader with the potential to perform even better", she said.

While that plan does not yet entail a full separate listing, it could make one possible in the future.

It said: "The board will communicate further details on the optimal method of separation in due course".

The split is likely to trigger bid interest in both businesses, bankers said.

Prospective bidder Melrose is a turnaround specialist, picking up floundering firms on the cheap with the intention of improving them and selling them off at a higher price.

Involving paper in its GKN bid is a departure from its usual strategy of raising funds for acquisition through rights issues.

Shares in GKN were up 26% at 420.00 pence on the news, valuing the company at GBP7.26 billion, and having hit an all-time high of 425.00p earlier in Friday's session. It carried net debt of around 700 million pounds as of June 30, 2017.