Aircraft specialists in £2.5bn payment plan
GKN has promised to return up to £2.5billion to investors over the next three years as it stepped up efforts to see off a £7.4billion hostile takeover bid.
The FTSE 100 engineer, which makes parts for fighter planes and commercial aircraft, outlined a new strategy to deliver a “world class financial performance”.
It has rejected as “fundamentally undervaluing” the business a cash and shares approach by Melrose Resources, a turnaround specialist which aims to generate value for shareholders by improving underperforming assets before selling them on.
GKN has already begun an operational separation of its aerospace and automotive divisions and is targeting disposals including the sale of its powder metallurgy business. An efficiency drive is expected to improve profit margins and deliver recurring annual cash benefits of £340million by the end of 2020.
GKN chief executive Anne Stevens said its shareholders should receive all the benefits of its long-term investments.
She said: “Too often we pursued growth at the expense of returns – this will no longer be the case. The new strategy brings clarity, accountability and focus to GKN’s world class businesses and will allow it to attain world class financial performance. And we are bringing greater focus, with our divisions now being run as separate operations.”
Melrose claimed GKN’s announcement was a “stark admission of its underperformance over many years and a validation of the Melrose diagnosis”.
It said: “The fundamental transformation in culture and approach needed to improve GKN is only possible with a change of control, new leadership and fresh thinking.” Melrose chairman Christopher Miller added: “The document is effectively a ‘jam tomorrow’ and ‘trust me’ plea from a management team with a limited track record of delivering value for shareholders.
“We are offering shareholders £1.4billion in cash up-front and a majority stake in a UK manufacturing powerhouse, driven by a management team that has an unrivalled track record of over delivering on its promises.”