Engineering and aerospace group GKN rejects ‘opportunistic’ £7 billion bid

Engineering and aerospace group, GKN has rejected an “opportunistic” approach from turnround specialist Melrose valuing the company at £7 billion.

The troubled global engineering group, which has offices in Bristol, Birmingham and London among others, added that it plans to separate the aerospace and automotive businesses under newly-confirmed chief executive Anne Stevens and launching a new two-year revamp plan.

A statement from the company said: “The board of GKN has considered the Proposal… and has unanimously rejected it, having concluded that the proposal is entirely opportunistic and that the terms fundamentally undervalue the Company and its prospects. In addition, the proposal would materially dilute the exposure of shareholders to the meaningful upside opportunities that the board believes are present within the company.”

GKN said that trading in the fourth quarter of 2017 was in line with expectations and that adjusted pretax profit will be slightly ahead of the £678 million made in 2016.

The company has said that a new strategy named “Project Boost” will also “improve significantly performance in all of GKN’s businesses”.

Nicholas Hyett, Equity Analyst, Hargreaves Lansdown, added his opinion to the bid: “GKN has made up for years of lumbering progress in a flash. A takeover offer, subsequent rejection, new CEO, transformation strategy, trading update and planned separation of the business all in one go – it’s hard to describe GKN as a Mondeo now.

“The separation of the Automotive and Aerospace units has been on the cards for years, with little obvious cross over between the two businesses. Historically, the pension deficit has held the group together, but with the sprawling footprint likely to have contributed to recent profit warnings, the reasons for divorce now seem to outweigh the costs of splitting.

The money to be made from a split is likely to have been what drew turnaround specialist Melrose to the table in the first place – the challenge for newly confirmed CEO Anne Stevens is to deliver a better result for shareholders than the 405p she turned down today.”