GKN shares surge on Melrose takeover approach

A man walks under an electronic information board at the London Stock Exchange in the City of London

GKN - Offer rejected, Automotive and Aerospace to separate

By 11.20am, GKN shares had extended their earlier gains to over 26%, up 87.3p at 420p, while Melrose shares gained 5.4% or 11.6p at 226.6p.

Having submitted its proposal on 8 January, Melrose has until 9 February to indicate whether it wants to follow up with a firm offer for GKN. In 2015, Slaughters acted for the company on a £200m shares placement.

GKN, which in October past year said business performance was not meeting management expectations, has now made a decision to separate its aerospace and automotive division and launched a a so-called "Project Boost" performance improvement programmeme. GKN shareholders would have held around 57 per cent of the combined group.

"In addition, the proposal would materially dilute the exposure of GKN shareholders to the meaningful upside opportunities that the board believes are present within the company".

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". GKN acknowledges that profit margins and cash generation have been "below expectations", despite a rise in sales.

It said: "The board will communicate further details on the optimal method of separation in due course".

Revenue Estimates Analysis International Business Machines Corporation (IBM)
The technology company reported $3.30 earnings per share for the quarter, topping the Zacks' consensus estimate of $3.28 by $0.02. Edge Wealth Management LLC lifted its holdings in shares of International Business Machines by 5.6% during the second quarter.

The firm issued a profit warning in October over problems at its aerospace division.

The takeover tilt comes at a hard time for GKN, which in November ditched its incoming boss less than two months before he was due to take the top job as it warned over another hit in its troubled United States plant.

GKN said on Friday that Anne Stevens, its interim chief executive, would remain in the role permanently.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said the separation of units has "been on the cards for years, with little obvious crossover between the two businesses".

"The money to be made from a split is likely to have been what drew turnaround specialist Melrose to the table in the first place - the challenge for newly confirmed chief executive Anne Stevens is to deliver a better result for shareholders than the 405p she turned down today".

Within Friday's announcement, GKN alluded that fourth quarter trading was "in line with expectations" and said it still expects the full year's profit before tax to be "slightly ahead" of last year's figure of £678m. That write-off, associated with GKN's U.S. aerospace business, will be "nearer the upper end" of an £80-130 million range, GKN indicates.

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