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Melrose Industries plans to spin off one of Britain’s oldest engineering businesses and spin off GKN’s automotive division as a new UK-listed company.
In the year The FTSE 100 turnaround specialist, which acquired the auto parts and aerospace components maker in a bitter £8bn takeover in 2018, is expected to confirm the move on Thursday.
Under the plan, Melrose will separate GKN’s automotive and smaller powder metallurgy businesses from its aerospace arm in exchange for stock compensation, people familiar with the situation said.
The automotive company, one of the world’s leading suppliers of drivetrains, aims to trade on the London Stock Exchange next year under an as-yet-unknown name.
Melrose also owns GKN Aerospace, a leading supplier of “tier one” airframes and engine components to aerospace and defense companies including Airbus and Rolls-Royce.
The move will give the automotive unit the freedom to raise funds to make acquisitions in the sector, which is expected to intensify as suppliers come under more pressure during the transition to electric vehicles.
About half of the new orders in GKN’s driveshaft business are parts for electric models, which are made in the same factories that go into motorized vehicles.
In the year He said he expects electric vehicles to account for 45 percent of all jobs by 2025.
A third of the automotive business is in Europe, most of it in the US, where the shift to electric cars and operations in China are expected to slow.
Melrose, which had a market value of £5.6bn at the close on Wednesday, could fall out of the FTSE 100 index as a result of the payout.
The defunct automotive group accounts for roughly two-thirds of Melrose’s current revenue, which is expected to exceed £7.5bn by 2022.
GKN Automotive CEO Liam Butterworth is expected to be head of the demerging business, a separate chair will be appointed.
GKN, one of Britain’s oldest engineering names in the late 1700s, completes the split; After the establishment of ironworks in South Wales.
Melrose, a turnaround specialist with a loyal following in the city, bought the company in 2018, sparking fears from critics that it would break up the conglomerate.
The company, led by chief executive Simon Peckham, argues that it will look at underperforming manufacturing businesses, restructure and sell them. It has generated huge profits for executives and shareholders over the years.
Under the terms of the divestiture, Melrose divested the aerospace business to the government for five years. The deal expires next year.
Peckham has previously said that the group would consider splitting up GKN when the time comes and create separate floats for both the automotive and aircraft businesses.
The company said in March that the turnaround of its automotive business would be largely completed this year.
The aerospace division’s recovery, hit by the coronavirus-induced downturn in the aviation industry, has lagged behind, although Melrose told investors in June that its restructuring efforts were on track and gave a big review of the business.
In the year He said at the time that he expected 7 percent annual revenue growth for the aerospace business through 2030, predicting a rapid recovery in 2025.
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