Jan 18, 2018 | By Julia
GKN is in the headlines again this week, but not necessarily for the reasons the multinational automotive and aerospace company would have expected. Following a string of hard-hitting losses at GKN’s American aerospace plant, British investment and acquisition giant Melrose swooped in with an aggressive £7.4 billion takeover offer targeted at shareholders, which GKN resoundingly dismissed earlier this week. The decision immediately impacted GKN's market value, sending its shares soaring 30%.
Melrose, a company best known for buying up and rejuvenating distressed manufacturers, recently portrayed GKN as “an under-managed organisation without focus” and sub-par shareholder returns, but one that offers “huge scope for improvement.” The GKN board responded swiftly with a unanimous decision, stating that Melrose’s offer was “entirely opportunistic” and “fundamentally undervalues the company and its prospects.”
The takeover tilt has come at a tough time for the automotive and aerospace manufacturer, whose roots stretch back to the 18th century, but has recently suffered a series of near fatal setbacks. Currently a chief producer of parts for the Boeing 737 jet, the Black Hawk helicopter, and Volkswagen and Ford vehicles, GKM seemed to have bright plans for the future as recently as a few months ago. In June, the British manufacturing company partnered with the U.S. Department of Energy to develop a new type of 3D printing, known as laser metal deposition with wire (LMD-w), for the production of large-scale titanium aerospace parts. By October, GKM was cutting the ribbon at a new Innovation Centre in Abingdon, Oxfordshire, a facility devoted to developing advanced tech for the company’s automotive business.
In November, however, GKM fired its incoming boss after the company suffered another bad hit at its turbulent US plant. GKM had already expected to write off £15 million on its Alabama facility, due to so-called “revised assumptions” on program inventory and receivable balances, subsequently sparking a broader review across the division. The end of 2017 brought only worse news for the troubled GKM, as the manufacturer discovered additional write-offs ranging between £80 million and £130 million. At the market close this past Thursday, GKM was valued at 5.7 billion pounds, prompting Melrose to move forward with its aggressive takeover offer.
“We are aiming to put into sharp focus the options for GKN shareholders,” Melrose chief executive Simon Peckham told press. “They can elect to sell in the market right now for a substantial premium to Friday’s opening price which itself has increased following a rise in the price of Melrose’s shares. Or they can choose to combine their business with ours and have the majority share in what we are confident will be a business capable of significant value enhancement.”
Determined to persevere in spite of Melrose’s bid, GKN has announced tentative plans to split in two, a move which sent shares in the firm soaring 30 percent late last week. GKN’s new chief executive Anne Stevens will be holding her own meetings with shareholders this week, along with the firm’s finance director Jos Sclater. The main topic of discussion is expected to be the company’s revitalization plan, which will focus on boosting cash generation and profit margins. Yet, at least for now, nothing is set in stone. Melrose has until February 9 to make a firm offer or drop its bid for GKN.
Posted in 3D Printer Company
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