GKN shares skyrocket after it thwarts £7bn takeover

GKN said that it was accelerating plans to demerge its £4.2 billion annual revenue automotive business from its £3.4 billion aerospace operations after the unsolicited £7 billion takeover proposal from Melrose, a specialist in buying troubled engineering firms, shaking them up and selling them on again. Compounding the upheaval, the United Kingdom decision to leave the European Union has clouded the outlook for the country's autoparts manufacturers due to their reliance on open trade.

The share-and-cash offer, tabled on January 8th, valued GKN at 405 pence per share at that time, a 24 per cent premium to the closing price the day before.

GKN also said that Anne Stevens, now Interim Chief Executive, has agreed to become the Group's new Chief Executive with immediate effect.

GKN said each business would have distinct investment profiles and capital allocation policies. The shares have boosted the benchmark FTSE 100 index which now stands 0.14 percent higher at 7,773.73 points. Melrose believes that shareholder value would be maximised by it significantly improving the businesses prior to any separation.

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".

Melrose now has until 5pm on 9 February to decide whether it intends to make a firm offer for GKN or not. The cash portion of the bid would be financed by debt.

The company's autos unit, which makes drivetrain components, accounts for nearly half of sales versus just over a third from aerospace, though the latter generates more profit at 44 percent of the total.

One shareholder in Melrose, who also previously used to own stock in GKN, said "good assets, bad management" had always been the story at GKN. The group also has metallurgy and land-systems divisions.

A second large writedown at the aerospace division in November saw the departure of chief executive-designate Kevin Cummings, the head of the aerospace division who had been set to take over the top job this month.

October 13: GKN announces charges of 55 million pounds, including 15 million from the North American unit that Cummings once ran, after a review.

GKN confirmed its position as a major supplier of jetliner wing, tail and fuselage components with the purchase of an Airbus plant in Filton, England, in 2008.

Vanessa Coleman