LONDON MARKETS: FTSE 100 Clings To Its Record As GKN Soars 26%

Ceria Alfonso
Enero 13, 2018

Smiths Group (LON:SMIN) is also one of today's most notable FTSE 100 risers after updating investors on the impact from the tax reform on the other side of the Atlantic.

GKN said Stevens had conducted a review which would split its aerospace division - formed by the purchase of a stake in Westland helicopters in 1988 - from its automotive business.

In accordance with the UK's takeover rules, Melrose has until 5.00pm on 9 February 2018 to counter with a new offer for GKN.

GKN said in a statement that having considered the proposal with its financial advisers, it has unanimously rejected the offer, describing it as "opportunistic" and stating that it undervalues the company and its prospects.

Melrose, by contrast, says the deal would deliver "significant operational and commercial benefits" and reverse "a history of existing GKN management not delivering on margin target". "The timing of the separation will be determined by the need to maximise the economic benefits and minimise the costs associated with separation".

The firm itself undertook a "wide-ranging review" of its business past year, as profit margins and cash generation were stuck "below expectations". The company also warned on profits after uncovering problems at its aerospace division.

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A two-year programme dubbed "Project Boost" has been launched to "significantly" improve performance across the business.

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.

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 USA plant.

'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'.

"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".

On the appointment of Stevens as new chief executive, the firm's chairman Mike Turner said she "has the track record to transform GKN", pointing to her "successful turnaround" of The Ford Motor Company's Mexico, Canada and South America businesses and senior roles at Carpenter Technology and Lockheed Martin. This is before accounting for the previously announced substantial write-offs in the North American Aerospace business.

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