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GKN shares skyrocket after it thwarts £7bn takeover

13 January 2018

GKN, which makes plane and vehicle parts, said on Friday that it had turned down an offer from Melrose on 8 January that valued the company at 405 pence per share.

Also included in the statement issued today reveals plans to split the aerospace and automotive divisions into separate companies, and that Anne Stevens, now Interim Chief Executive, agreeing to become the Group's new Chief Executive with immediate effect.

"The proposal would materially dilute the exposure of [our] shareholders to the meaningful upside opportunities that the board believes are present within the company", says GKN.

Its board said the cash and shares bid was "entirely opportunistic" and "fundamentally" undervalued GKN.

Melrose must now make a firm offer for GKN or withdraw its bid by 9 February.

Liberal Democrat leader Vince Cable called on Business Secretary Greg Clark to block the takeover: "GKN stands for long term investment in advanced manufacturing whereas Melrose are in the business of short-term financial engineering".

The firm itself undertook a "wide-ranging review" of its business a year ago, as profit margins and cash generation were stuck "below expectations".

Pioneer Natural Resources Company (PXD)
Following the transaction, the chief operating officer now directly owns 249,010 shares in the company, valued at $46,086,770.80. The firm has "Market Perform" rating given on Wednesday, August 2 by Wells Fargo. 45,449 were reported by Buckingham Mgmt Inc.

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 United States aerospace business.

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.

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

A two-year programme dubbed "Project Boost" has been launched to "significantly" improve performance across the business.

"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.

GKN also announced that Anne Stevens, now its interim chief executive, has agreed to take over as the group's new chief executive with immediate effect.

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 previous year. That write-off, associated with GKN's United States aerospace business, will be "nearer the upper end" of an £80-130 million range, GKN indicates.

GKN shares skyrocket after it thwarts £7bn takeover