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GKN Rejects Melrose Offer; To Separate Businesses; Names Stevens CEO; Stock Up

GKN plc (GKN.L), an engineering business for the aerospace and automotive markets, Friday rejected a preliminary and unsolicited takeover proposal from Melrose Industries PLC (MRO.L) of 405 pence per share. The company said it intends to separate the businesses. Further, GKN said its fourth-quarter trading was in line with expectations and that it continues to expect 2017 profit before tax to be slightly ahead of 2016. GKN shares were gaining around 26 percent in the morning trading in London.

GKN also said that Anne Stevens, currently Interim Chief Executive, has agreed to become the Group's new Chief Executive with immediate effect.

Regarding the rejection of the Melrose offer, GKN said the offer is entirely opportunistic and that the terms fundamentally undervalue the company and its prospects.

In its statement, Melrose also confirmed that it made a proposal on January 8 to acquire GKN for 405 pence for each GKN share, payable 80% in new Melrose shares and 20% in cash. This represents 1.49 new Melrose shares and 81 pence in cash for each GKN share. The offer would result in GKN shareholders owning approximately 57% of the enlarged group.

The terms represent a premium of approximately 24% over the closing share price of GKN on January 5, 2018, the last business day prior to the approach.

Commenting about GKN's intention to separate the businesses, Melrose said it believes that shareholder value would be maximised by it significantly improving the businesses prior to any separation. The potential acquisition represents a significant opportunity for Melrose to execute on its strategy of maximising inherent value of specialised industrial businesses it owns.

Meanwhile, GKN said its Board will communicate further details on the optimal method of separation in due course. The timing of the separation will be determined by the need to maximise the economic benefits and minimise the costs associated with separation.

In London, GKN shares were at 420.60 pence, up 26.42 percent and Melrose shares were at 229.50 pence, up 6.74 percent.

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