Published: Sat, January 13, 2018
Money | By Armando Alvarado

GKN pushes ahead with demerger after rejecting £7bn takeover offer

GKN pushes ahead with demerger after rejecting £7bn takeover offer

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. This represents 1.49 new Melrose shares and 81 pence in cash for each GKN share.

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 U.S. aerospace business.

The £7 billion offer from Melrose - a specialist in buying troubled engineering companies, shaking them up and selling them on again - values GKN's shares at 405p, 24 per cent higher than where they started the week.

In rejecting the bid, GKN said it would separate its aerospace and automotive divisions to improve profitability.

On the appointment of Stevens as new chief executive, the firm's chairman Mike Turner said she "has the track record to transform GKN", pointing to her "successful turnaround" of The Ford Motor Company's Mexico, Canada and South America businesses and senior roles at Carpenter Technology and Lockheed Martin.

Today (12 January) GKN revealed that it had received an unsolicited offer from Melrose to acquire the company.

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

Its board, in tandem with financial advisers Gleacher Shacklock, JP Morgan Cazenove and UBS, "unanimously rejected" the proposal, which it deemed "entirely opportunistic" and to "fundamentally undervalue" the company and its prospects. The company was founded and floated on the stock market in 2003 as a cash shell by three businessmen, Christopher Miller, David Roper and Simon Peckham, who put about £3m into the business.

'The separation of the automotive and aerospace units has been on the cards for years, with little obvious cross over between the two businesses, ' he said. The offer would result in GKN shareholders owning approximately 57% of the enlarged group.

"GKN is a world leader with the potential to perform even better", she said.

While that plan does not yet entail a full separate listing, it could make one possible in the future.

Meanwhile, GKN said its Board will communicate further details on the optimal method of separation in due course.

Assistant general secretary for manufacturing, Tony Burke, said: "The only interests this predatory takeover bid are in, are those of the speculators looking to turn a quick buck". It carried net debt of around £700 million as of June 30th, 2017.

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