Following the widely reported news that UK based investment group Melrose Industries has made a bid to takeover GKN plc, the Financial Times has reported that this could result in the sale of GKN’s Powder Metallurgy business.
Although an initial proposal from Melrose to acquire GKN was rejected by GKN’s Board, both companies are expected to launch campaigns to convince GKN shareholders of their respective plans for the group.
Both GKN and Melrose are reported to be planning to split GKN’s aerospace and automotive businesses. The Financial Times also stated that Melrose will tell investors that it plans to deliver margins above those targeted by GKN by simplifying management, investing in operations and selling non-core businesses. These are believed to include the £1bn Powder Metallurgy business as well as some businesses from the core motor and aerospace divisions, it was stated.
Simon Peckham, Chief Executive of Melrose, is reported to have stated, “We are aiming to put into sharp focus the options for GKN shareholders. They can elect to sell in the market right now for a substantial premium to Friday’s opening price or they can choose to combine their business with ours and have the majority share in what we are confident will be a business capable of significant value enhancement.”
A GKN spokesman said GKN’s management “have the expertise and commitment to implement our transformation… which will improve our cash generation and profit margins and maximise value for our shareholders.” The spokesman added, “Melrose’s opportunistic offer… would deprive our shareholders of the full benefits of the value that GKN intends to deliver.”
The news drove GKN’s shares up 26.2% and Melrose shares up 4.3% at close on Friday 12 January.