12.8 C
New York

Melrose begins break up of GKN: Auto business to be spun off 4 years after £8bn takeover

Published:

Melrose begins break up of GKN: Auto business to be spun off 4 years after £8bn takeove

GKN’s break-up has begun just 4 years after its controversial £8billion takeover.

The automotive and aerospace components business was bought by Melrose Industries in a hostile takeover in 2018 that this newspaper opposed over fears for the long run of certainly one of Britain’s oldest engineering firms.

Melrose yesterday outlined plans to dismantle the 263-year-old company by splitting its high-powered aerospace arm and automotive business into separate firms.

Partners: GKN, which works with Jaguar on its all-electric Formula E automobile (pictured), was bought by Melrose Industries in a hostile takeover in 2018

Russ Mould, analyst at AJ Bell, said: ‘The acquisition of GKN by Melrose in 2018 was controversial and bitter to say the least.

‘The announcement that the automotive division is to be spun off may prompt a chorus of “I told you so” from those that warned about certainly one of the UK’s most storied engineering names falling into the hands of the turnaround specialist.’ 

The break-up will see the automotive and powder metallurgy businesses – which make powertrains and driveshafts for lots of the world’s biggest vehicle manufacturers – listed on the London Stock Exchange under an as yet undecided name. Liam Butterworth, GKN’s boss, will head the demerged business.

The move splits certainly one of Britain’s oldest engineering names, which dates back to 1759 and made cannons that helped defeat the French at Waterloo in addition to the Second World War’s iconic Spitfires. 

Its aerospace arm makes systems and components for passenger planes and fighter jets while the automotive business has a long-term partnership with Jaguar Racing, working on its all-electric Formula E automobile.

Melrose – whose mantra is buy, improve, sell – will still hold the aerospace arm of GKN, which goes through a restructuring.

Melrose chief executive Simon Peckham was triumphant, saying the intention had all the time been to separate up the companies.

He said: ‘We all the time told you we might break it up. From a government standpoint, what more could you would like than two quoted UK large businesses?’ Details of the split show the brand new auto company will aim to trade on the London Stock Exchange next 12 months.

Triumphant: Melrose boss Simon Peckham said the intention had always been to split up the businesses

Triumphant: Melrose boss Simon Peckham said the intention had all the time been to separate up the companies

No valuation has been provided, but analysts at wealth manager Investec speculated it might be value as much as £4.9billion. 

A boss shall be appointed at a later date and Peckham will tackle an executive director position on the board alongside Melrose finance director Geoffrey Martin.

The split leaves Melrose with the aerospace arm of GKN, which under terms of the takeover it cannot sell until 2023.

Aerospace was essentially the most contentious a part of the 2018 takeover since it was perceived by critics of the deal to be a risk to national security.

When Melrose does need to sell the aerospace business it would face an even bigger hurdle because since 2018 the Government has given itself much greater capability to intervene in takeovers.

Melrose also released half-year results, showing revenues rose by £200million to £3.9billion but losses widened to £358million, from £275million within the previous 12 months.

Shares fell 9.3 per cent, or 12.85p, to 124.8p yesterday.

sportinbits@gmail.com
sportinbits@gmail.comhttps://sportinbits.com
Get the latest Sports Updates (Soccer, NBA, NFL, Hockey, Racing, etc.) and Breaking News From the United States, United Kingdom, and all around the world.

Related articles

spot_img

Recent articles

spot_img