GKN – Offer rejected, Automotive and Aerospace to separate – Hargreaves Lansdown

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The GKN board has rejected an offer from industrial turnaround specialist Melrose. The offer valued GKN at 405p per share and comprised 81p in cash per share with the remainder made up of Melrose shares.

GKN also announced it intends to separate the Aerospace and Automotive units, with further details to be determined at a later date.

The shares rose 20% in early trading to 400p.

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Melrose offer, planned separation and trading update

The GKN board described the Melrose offer as “entirely opportunistic” adding that “the terms fundamentally undervalue the Company”. Melrose now has until 5pm on 9 February 2018 to announce whether it intends to make a firm offer for GKN or not.

GKN also announced that the Board believes separating the Aerospace and Automotive businesses will help maximise shareholder value by setting distinct strategic, operational and financial objectives for each business. The Board will give further details on how it intends to do this in due course.

Accompanying this decision is a two year initiative (Project Boost) to improve cash and profit in both parts of the business. It includes plans to optimise ‘procurement, process & productivity, and capital allocation’ and will also include the disposal or closure of non-core operations.

A brief trading statement accompanying the announcement confirmed that the group continues to expect profit before tax for the year to be slightly ahead of last year’s £678m. This is before accounting for the previously announced substantial write-offs in the North American Aerospace business.

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