Melrose begins GKN break-up: car business to be spun off four years after £8bn takeover

GKN’s collapse came just four years after a controversial £8 billion takeover.

The automotive and aerospace components business was bought by Melrose Industries in a hostile takeover in 2018 that this newspaper opposed amid concerns for the future of one of Britain’s oldest engineering companies.

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

Russ Mould, an analyst at AJ Bell, said: “GKN’s acquisition by Melrose in 2018 was controversial and bitter, to say the least.

“The announcement that the automotive division is to be spun off may leave those who warned that one of Britain’s most famous engineering names would end up in the hands of a repair specialist exclaim, ‘I told you so.’

The split will see the automotive and powder metallurgy businesses, which make transmissions and driveshafts for many of the world’s biggest carmakers, list on the London Stock Exchange under a yet-to-be-determined name. Liam Butterworth, the boss of GKN, will lead the demerged business.

The move separates one of Britain’s oldest engineering names, which dates back to 1759 and built the guns that helped defeat the French at Waterloo, as well as the iconic Spitfires of the Second World War.

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

Melrose, whose mantra is buy, improve, sell, will continue to house GKN’s aerospace division, which is undergoing restructuring.

Melrose chief executive Simon Packham triumphed, saying the intention had always been to split the business.

He said: “We always told you we would sort it out. From a government perspective, what more could you want than two major UK listed companies?” Details of the split show that the new car company will seek to trade on the London Stock Exchange next year.

Triumphant: Melrose boss Simon Peckham said the intention was always to split the business

No valuation was provided, but analysts at Investec suggested it could be worth £4.9bn.

A chairman will be appointed at a later date and Peckham will take up the role of chief executive on the board alongside Melrose chief financial officer Geoffrey Martin.

The split leaves Melrose with GKN’s aerospace division, which cannot be sold until 2023 under the terms of the takeover.

The aerospace industry was the most controversial part of the takeover in 2018 because critics of the deal saw it as a national security risk.

If Melrose wants to sell the aerospace business, it will face a bigger hurdle because the government has given itself much more power to intervene in takeovers since 2018.

Melrose also published half-year results, showing revenues rose by £200m to £3.9bn, but losses widened to £358m from £275m the previous year.

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