GKN propels FTSE to new high on bid rejection

GKN makes parts for the F-15 fighter jet

GKN makes parts for the F-15 fighter jet Jim Hollander  EPA

Chairman, Mike Turner, said: "The Board believes that Anne Stevens has the track record to transform GKN".

Regarding the rejection of the Melrose offer, GKN said the offer is entirely opportunistic and that the terms fundamentally undervalue the company and its prospects.

The bid kept was £7bn valuing around 405 p per share but GKN denied it saying the company deserves a very high price.

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.

Accompanying this decision is a two year initiative (Project Boost) to improve cash and profit in both parts of the business.

Last year, lower profit margins and cash generation prompted GKN to conduct a wide-ranging review of its business.

Meantime, GKN believes that value for its shareholders will be "maximised" by its separation of its aerospace and automotive divisions in order to set "distinct strategic, operational and financial objectives for the [two] businesses, with clear focus, accountability and better-aligned incentive plans".

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

'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'.

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Anne Stevens, previously interim CEO, has agreed to take on the position of CEO with immediate effect.

Kevin Cummings had originally been due to take up the role on 1 January, but in November the company announced it was looking for "alternative leadership".

"Operational challenges" at its North America-based aerospace business were one factor behind a profit warning in October. GKN is divided into multiple sectors, including aerospace, automotive technology and engineering solutions.

On the back of this news, GKN's shares hit their highest level in well over a decade.

The Patent Nut & Bolt Company, founded in Birmingham in 1856, was combined with Dowlais in 1900 in a new group called Guest, Keen & Co.

"If Melrose's bid is successful it will blow a hole in the government's hope of developing a coherent industrial strategy and signal that government ministers are happy to see yet another British company fall prey to vulture capital".

Speculation has been ongoing for a while as to whether the firm would be a takeover target or decide to break itself up. Today the FTSE 250 company is valued at nearly £4.4bn.

Last August the firm acquired U.S. company Nortek for £2,2bn.

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