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

Melrose starts breaking up GKN: Car company to be spun off four years after £8bn takeover

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GKN’s breakup started just four years after its controversial £8bn takeover.

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

Melrose yesterday outlined plans to dismantle the 263-year-old company by splitting its powerful aerospace and automotive business into separate companies.

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

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

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

“The announcement of the car division’s split could send a ‘I told you so’ chorus from those who warned that one of the UK’s most storied tech names would fall into the hands of the turnaround specialist.”

The break-up will see the auto and powder metallurgy companies – which make powertrains and driveshafts for many of the world’s largest automakers – listed on the London Stock Exchange under an undecided name. GKN boss Liam Butterworth will lead the spin-off company.

The move splits one of Britain’s oldest engineering names, dating back to 1759 and making cannons that helped defeat the French at Waterloo, as well as the iconic Spitfires of World War II.

The aerospace arm produces systems and components for passenger aircraft and fighter jets, while the automotive industry is building a long-term partnership with Jaguar Racing on its all-electric Formula E car.

Melrose — whose mantra is buy, improve, sell — will still keep GKN’s aerospace arm, which is undergoing restructuring.

Melrose CEO Simon Peckham was triumphant, saying the intention had always been to split the companies.

He said, ‘We always told you we’d take it apart. From a government point of view, what more could you want than two listed large companies in the UK?’ Details of the split show the new car company will trade on the London Stock Exchange next year.

Triumphant: Melrose boss Simon Peckham said it had always been the intention to split the companies

Triumphant: Melrose boss Simon Peckham said it had always been the intention to split the companies

Triumphant: Melrose boss Simon Peckham said it had always been the intention to split the companies

No valuation has been given, but analysts at investment manager Investec speculated it could be worth as much as £4.9bn.

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

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1662674716 441 Melrose begins break up of GKN Auto business to be

The split leaves Melrose with GKN’s aerospace arm, which it can only sell in 2023 under the takeover.

Aerospace was the most controversial part of the 2018 acquisition as it was seen by critics of the deal as a risk to national security.

If Melrose wants to sell its aerospace business, it will face a bigger hurdle, as the government has given itself much more options since 2018 to intervene in acquisitions.

Melrose also released half-year results showing sales rose £200m to £3.9bn, but losses rose to £358m, from £275m in the previous year.

Shares fell 9.3 percent or 12.85p to 124.8p yesterday.

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