GKN shares jump 26% after announcing rejected bid from Melrose


Under the proposal - which valued GKN at around £7 billion ($9.5 billion) - the shares would have been acquired with a combination of cash (20%) and new Melrose shares (80%).

Shares in the company were up almost 24 per cent at 412.2p at the time of writing.

Instead, the firm confirmed in a statement on Friday it had made a decision to split out the automotive and aerospace into two separate companies as part of a two-year "transformation programme", ending months of speculation over the firm's future.

GKN also announced that the Board believes separating the Aerospace and Automotive businesses will help maximise shareholder value by setting distinct strategic, operational and financial objectives for each business.

GKN says Melrose's "preliminary and unsolicited" offer to purchase the entire shareholding was "entirely opportunistic", and that the terms "fundamentally undervalue the company and its prospects".

Melrose told the Stock Exchange on Friday there would be significant operational and commercial benefits arising from its ownership of GKN's businesses, "reversing a history of existing GKN management not delivering on margin targets".

More news: Snow warning for Largs and west of Scotland
More news: "Meet LG's new Rollable 65" OLED display
More news: Premier Li vows to build community of shared future with Cambodia

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

GKN, which used to be known as Guest, Keen and Nettlefolds and traces its history back to 1759, has struggled in recent years and its profit warning came after a downturn in its USA aerospace business.

On Friday, it said a new two-year strategy called Project Boost would significantly increase cash flow by cutting costs and expenditure along with tighter pricing control. 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.

GKN also announced interim chief executive Anne Stevens would become the new boss of the company with immediate effect after its incoming chief executive left the group in November before taking up his new role.

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. 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.

The group ousted Kevin Cummings, GKN's aerospace head, who was due to take over from incumbent chief executive Nigel Stein in January.