GKN plots break-up after rejecting £7bn takeover offer

Image      GKN is one of Britain's most venerable engineers

The offer represented a price of 405p per share, comprising 80% in new Melrose shares and 20% in cash.

United Kingdom shares were moving in a narrow range on Friday as oil prices dipped and GKN said it had rejected a takeover bid from Melrose Industries.

The benchmark FTSE 100 was up 0.1 percent at 7,769 in late opening deals after rising 0.2 percent in the previous session.

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

GKN rejected the proposal, saying: "The Board of GKN has considered the proposal together with its financial advisers, Gleacher Shacklock, JPMorgan Cazenove and UBS Limited, 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 its own statement, released mid-morning Melrose said it believes that there would be "significant operational and commercial benefits arising from Melrose's ownership of GKN's businesses, reversing a history of existing GKN management not delivering on margin targets".

Under the stock market rules, Melrose is now required to either announce a firm offer by 5pm on 9 February, or announce that it is no longer interested.

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

It added: "The timing of the separation will be determined by the need to maximise the economic benefits and minimise the costs associated with separation".

The firm issued a profit warning in October over problems at its aerospace division.

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

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.

In November, the company announced that its CEO designate Kevin Cummings was leaving the company with immediate effect following a profit warning brought about by difficulties on USA aerospace operations.

"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".

For 2017, the company continues to expect management pretax profit to be slightly ahead of GBP678 million recorded in 2016, before additional Aerospace write-offs announced in November a year ago.

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