Published: Sat, January 13, 2018
Business | By Max Garcia

Redditch firm GKN rejects £7bn takeover bid from Melrose

Redditch firm GKN rejects £7bn takeover bid from Melrose

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. Serious threat to #industrialstrategy. where is gov?

The board and its advisers "concluded that the proposal is entirely opportunistic and that the terms fundamentally undervalue the company and its prospects", GKN said in a statement. GKN shareholders would have held around 57 per cent of the combined group.

Melrose responded, saying: "Melrose 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 potential acquisition represents a significant opportunity for Melrose to execute on its strategy of maximising inherent value of specialised industrial businesses it owns".

The company's autos unit, which makes drivetrain components, accounts for nearly half of sales versus just over a third from aerospace, though the latter generates more profit at 44 percent of the total. It expects to write down between £80m and £130m as the value of stocks at the division had been overestimated.

Also included in the statement issued today reveals plans to split the aerospace and automotive divisions into separate companies, and that Anne Stevens, now Interim Chief Executive, agreeing to become the Group's new Chief Executive with immediate effect. The former Ford Motor Co. executive, 69 will oversee the planned split, creating two companies with "distinct investment profiles and capital allocation policies", it said.

GKN also announced it intends to separate the Aerospace and Automotive units, with further details to be determined at a later date.

GKN said earlier this month it has now appointed Anne Stevens to run the group on a permanent basis after she took up the role of interim CEO in November.

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

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.

Following fourth-quarter trading "in line with expectations", GKN foresees a full-year pre-tax profit "slightly ahead" of the £678 million recorded in 2016. "What it hasn't done is generate enough cash from those market positions", one person familiar with the company said. It is now valued at more than £4bn, having returned £4.4bn to shareholders since its formation.

Like this: