GKN share price skyrockets as group rejects 'opportunistic' Melrose bid

GKN share price skyrockets as group rejects 'opportunistic' Melrose bid

Its board, in tandem with financial advisers Gleacher Shacklock, JP Morgan Cazenove and UBS, "unanimously rejected" the proposal, which it deemed "entirely opportunistic" and to "fundamentally undervalue" the company and its prospects. Melrose's share price has also advanced and is 6.56 percent better off at 229.10p. As per the regulations of bidding Melrose will have to make an offer by 9th February of this year.

The announcement came as the company appointed Anne Stevens as chief executive and announced its intention to restructure the business.

Unite, which is the main union representing workers across GKN's automotive, aerospace and R&D divisions, warned government ministers that any hope of a coherent industrial strategy would lie in tatters if the Melrose bid was allowed to succeed.

The maker of components used in the Black Hawk helicopter and by automakers such as Volkswagen and Ford cut its profit outlook in October, hurt by a writedown at its US aerospace division.

Accompanying this decision is a two year initiative (Project Boost) to improve cash and profit in both parts of the business.

GKN said on Friday it had launched a wide-ranging review in 2017 to identify why its profit margins and cash generation were coming in below expectations, despite growing sales.

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

The BBC quoted Nicholas Hyett, an analyst at Hargreaves Lansdown, as commenting that the split had been "on the cards for years" because there was little crossover 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", he said.

"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 pointed out.

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. That write-off, associated with GKN's U.S. aerospace business, will be "nearer the upper end" of an £80-130 million range, GKN indicates.

GKN's origins can be traced back to 1900. The town's ironworks supplied rails to railways in the United Kingdom and overseas, making it the world's largest by 1845.

Melrose Industries specialises in taking over troubled or underperforming industrial groups. It is now valued at more than £4bn, having returned £4.4bn to shareholders since its formation.

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According to Finviz reported data, The SMA20 of the stock is at 3.24 percent, SMA50 is 6.3 percent, while SMA200 is 1.57 percent. In related news, VP John Douglas Field sold 1,000 shares of the company's stock in a transaction dated Tuesday, January 9th.

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