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GKN shares jump 26% after announcing rejected bid from Melrose

GKN shares jump 26% after announcing rejected bid from Melrose

It said the offer was "entirely opportunistic" and "fundamentally undervalues the company and its prospects".

"GKN also said it intends to separate its aerospace and automotive businesses to "[recognise] the strategic optionality for shareholders in having separate companies with distinct investment profiles and capital allocation policies".

Market sources suggested companies such as Spirit AeroSystems or Triumph Group could be suitors for GKN's aerospace business. The housebuilder said it expects to deliver a significant improvement in profitability in 2018.

The share-and-cash offer, tabled on January 8th, valued GKN at 405 pence per share at that time, a 24 per cent premium to the closing price the day before. "The timing of the separation will be determined by the need to maximise the economic benefits and minimise the costs associated with separation".

Also included in the statement issued today reveals plans to split the aerospace and automotive divisions into separate companies, and that Anne Stevens, now Interim Chief Executive, agreeing to become the Group's new Chief Executive with immediate effect.

Investors have been calling for GKN to split its businesses as management persistently failed to meet targets to improve profit and cash flow despite growing sales.

The 737 MAX 9 which can carry up to 220 passengers is the second of three variants of the popular single-aisle model. Pic Stephen Brashear  Getty
Image GKN's aerospace customers include Boeing

The firm itself undertook a "wide-ranging review" of its business past year, as profit margins and cash generation were stuck "below expectations". "Portfolio rationalisation of our non-core product segments will also be a priority", says GKN.

GKN said earlier this month it has now appointed Anne Stevens to run the group on a permanent basis after she took up the role of interim CEO in November.

Ms Stevens, who at 69 has extensive experience in the aerospace and automotive sectors, said she would instill a much stronger performance and accountability culture at the group, which employs 58,000 people across 30 countries.

"Anne Stevens has the track record to transform GKN", states chairman Mike Turner.

GKN said current trading was in line with expectations, with 2017 profits expected to be slightly ahead of the 2016 figure of £678m before the United States write-off.

"We believe Melrose would be able to substantially improve the operations and we suspect shareholders would support an increased bid", Liberum analyst Ben Bourne said in a note to clients. That write-off, associated with GKN's United States aerospace business, will be "nearer the upper end" of an £80-130 million range, GKN indicates.

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