GKN PLC (LON:GKN) saw its shares soar 20% higher in early trading as the blue chip automotive and aerospace components company revealed it has rejected a takeover proposal and also unveiled plans to separate its businesses.
"The board of GKN has considered the proposal. and has unanimously rejected it, having concluded that the proposal is entirely opportunistic and that the terms fundamentally undervalue the company and its prospects", it said in a statement reported by Reuters.
Unite, which is the main union representing workers across GKN's automotive, aerospace and R&D divisions, warned government ministers that any hope of a coherent industrial strategy would lie in tatters if the Melrose bid was allowed to succeed.
GKN is located in over 30 countries, and includes manufacturing operations in East Cowes on the Isle of Wight.
The automotive and aerospace parts manufacturer confirmed in an update on Friday that it had received a "preliminary and unsolicited proposal from Melrose" on 8 January worth 405p per share, a 24% premium to its closing price on 5 January of 326p.
Unite said it is in close dialogue with GKN executives and its shop stewards will be meeting next week with their European counterparts to agree a coordinated response to stop a takeover.
GKN, which used to be known as Guest, Keen and Nettlefolds and traces its history back to 1759, has struggled in recent years and its profit warning came after a downturn in its U.S. aerospace business.
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The company said it intends to separate the businesses.
Under the stock market rules, Melrose is now required to either announce a firm offer by 5pm on 9 February, or announce that it is no longer interested.
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.
Last year, lower profit margins and cash generation prompted GKN to conduct a wide-ranging review of its 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. 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. 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 also announced on Friday that it had appointed Anne Stevens (left) as chief executive with immediate effect.
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