GKN to reorganise after rejecting takeover bid

Unite said it is in close dialogue with GKN executives and its shop stewards will be meeting next week with their European counterparts to agree a coordinated response to stop a takeover.

A bid battle is now likely as Melrose, which specialises in buying struggling businesses, turning them round and selling them at a profit with the proceeds given back to shareholders, will pursue its interest despite GKN's opposition. But Melrose shares have subsequently climbed 7%, lifting the value of the offer to 422p a share.

United Kingdom aerostructures manufacturer GKN has rejected a takeover bid from turnaround specialist Melrose Industries and disclosed a plan to separate its aerospace and automotive activities as part of a two-year business-improvement plan.

This came after GKN said earlier that it had rejected a 405p per share offer from Melrose, saying it was "entirely opportunistic" and "fundamentally" undervalues the company.

The initiative will be headed up by current interim boss Anne Stevens, who has been appointed the firm's new chief executive with immediate effect. Takeover rules mean it must make a firm offer by 9 February or walk away for six months.

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.

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A downturn in GKN's performance had reignited speculation it might separate its two divisions and restructure the business, which employs 58,000 people across 30 countries.

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 firm itself undertook a "wide-ranging review" of its business past year, as profit margins and cash generation were stuck "below expectations". Further, GKN said its fourth-quarter trading was in line with expectations and that it continues to expect 2017 profit before tax to be slightly ahead of 2016.

"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 chief executive Anne Stevens is to deliver a better result for shareholders than the 405p she turned down today".

GKN also announced that Anne Stevens, now its interim chief executive, has agreed to take over as the group's new chief executive with immediate effect. Today the FTSE 250 company is valued at nearly £4.4bn.

(Copyright © 2015. All Rights Reserved.)
 
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