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

GKN - Offer rejected, Automotive and Aerospace to separate

GKN shares surged as much as 28 percent to an all-time high after the Redditch, England-based company, a key supplier to Airbus SE and Boeing Co.

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.

Attempted #takeover of leading UK #Engineering @GKN_plc by asset stripper melrose.

"The board of GKN has considered the proposal. and has unanimously rejected it, having concluded that the proposal is entirely opportunistic and that the terms fundamentally undervalue the company and its prospects", it said in a statement reported by Reuters. GKN shareholders would have held around 57 per cent of the combined group.

The GKN board has rejected an offer from industrial turnaround specialist Melrose.

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. The biggest factory, in St Louis in Missouri, makes air frames for F-15 and F/A-18 fighter jets.

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The downturn led to the dismissal of the Aerospace head, Kevin Cummings, who had been due to takeover as the future group chief executive in January. Now Stevens, a former senior executive at Ford, has been handed the job permanently.

Melrose said on Friday it could significantly improve the performance of both GKN's aerospace and engineering divisions, maximising value for shareholders before any split.

In rejecting Melrose's approach, GKN said interim CEO Anne Stevens, in the job since January 1, will keep the position permanently after taking over an "ongoing and wide-ranging" review of all businesses. Melrose now has until 5pm on 9 February 2018 to announce whether it intends to make a firm offer for GKN or not.

Instead, the firm confirmed in a statement on Friday it had chose 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.

Annual trading was in line with expectations and GKN continues to expect 2017 management profit before tax to be slightly ahead of the previous year's £678m before write-offs from its North American aerospace business, which are estimated to be between £80m and £130m. "What it hasn't done is generate enough cash from those market positions", one person familiar with the company said.

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