GKN reject takeover bid that values the company at £7bn

GKN Rejected The Bid

GKN Rejected The Bid

GKN said after considering the proposal it has unanimously rejected it, having concluded that the offer approach is "entirely opportunistic and that the terms fundamentally undervalue the Company and its prospects". Melrose's share price has also advanced and is 6.56 percent better off at 229.10p. Melrose now has until 5pm on 9 February 2018 to announce whether it intends to make a firm offer for GKN or not.

It added that "the proposal would materially dilute the exposure of GKN shareholders to the meaningful upside opportunities that the Board believes are present within the company".

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.

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 USA aerospace division.

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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. GKN acknowledges that profit margins and cash generation have been "below expectations", despite a rise in sales.

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.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said GKN had "made up for years of lumbering progress in a flash".

"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.

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The decision followed a £130m writedown in GKN's aerospace division, which Mr Cummings had been running. That write-off, associated with GKN's USA aerospace business, will be "nearer the upper end" of an £80-130 million range, GKN indicates.

Ms Stevens, who at 69 has extensive experience in the aerospace and automotive sectors, said she would instill a much stronger performance and accountability culture at the group, which employs 58,000 people across 30 countries.

On the back of this news, GKN's shares hit their highest level in well over a decade. The town's ironworks supplied rails to railways in the United Kingdom and overseas, making it the world's largest by 1845. The firm first listed itself in 2003.

In 2012 Melrose bought utility metering firm Elster for £1.8bn and sold it three years later to Honeywell for £3.3bn.

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