GKN rejects takeover from Melrose, to split in two


Melrose said separately that it remains interested in a buyout.

The Board of GKN has considered the Proposal together with its financial advisers, Gleacher Shacklock, J.P. Morgan Cazenove and UBS Limited, and has unanimously rejected it, having concluded that the Proposal is entirely opportunistic and that the terms fundamentally undervalue the Company and its prospects.

"GKN is a world leader with the potential to perform even better", she said. Compounding the upheaval, the United Kingdom decision to leave the European Union has clouded the outlook for the country's autoparts manufacturers due to their reliance on open trade.

Anne Stevens, previously interim CEO, has agreed to take on the position of CEO with immediate effect.

GKN traded 26 percent higher at 419.6 pence as of 10:46 a.m.in London, valuing the company at 7.2 billion pounds, an indication investors expect a higher offer to emerge.

Shares in Smiths Group (LON:SMIN) rose 4.3% as the engineering firm said that the reforms to United States corporate income tax would benefit the company over the medium term. Melrose believes that shareholder value would be maximised by it significantly improving the businesses prior to any separation.

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Under the UK's takeover rules, Melrose now has until 5pm on February 9 to "put up or shut up" - either announce a firm bid or step away for the next six months, absent any change in circumstances. The cash portion of the bid would be financed by debt.

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. Those calls became louder after a profit warning in October, which was sparked by the difficulties at its aerospace business. The group also has metallurgy and land-systems divisions.

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.

The aviation arm was further bolstered by the purchase of Volvo AB's aircraft engine unit for nearly $1 billion in 2012 and the acquisition of Fokker Technologies Group in 2015, making it the world No. 2 in aerostructures behind Wichita, Kansas-based Spirit AeroSystems Holdings Inc.

Melrose, valued at £4.16 billion at the close on Thursday, specialises in buying companies that it can improve through investment and cost cuts with the aim of selling them at a profit.