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GKN rejects £7bn takeover bid from Melrose

From BBC - January 12, 2018

Shares in GKN, one of the UK's biggest engineering firms, have soared after it rejected a bid that values the company at 7bn.

Melrose made the unsolicited offer of 405p a share on 8 January.

Shares in GKN, which makes parts for Airbus and Boeing planes and employs 56,000 people globally, jumped more than a quarter to 423p.

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

Shares in Melrose, a manufacturing turnaround firm, also rose sharply, adding 7% to 229p. Takeover rules mean it must make a firm offer by 9 February or walk away for six months.

'Sprawling footprint'

Last year, lower profit margins and cash generation prompted GKN to conduct a wide-ranging review of its business. The company also warned on profits after uncovering problems at its aerospace division.

On Friday, it said a new two-year strategy called Project Boost would significantly increase cash flow by cutting costs and expenditure along with tighter pricing control.

It also announced plans to split its aerospace and automotive divisions into separate companies, although the timing has not been confirmed.

Nicholas Hyett, an analyst at Hargreaves Lansdown, said the split had been "on the cards for years" because there was little crossover between the two businesses.

"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.

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