Melrose Industries to demerge GKN automotive business

Turnaround specialist Melrose Industries said on Thursday that it plans to demerge its GKN Automotive and GKN Powder Metallurgy businesses and list the new holding company.

Melrose, which intends to seek shareholder approval for the proposed demerger in the first half of next year, will retain ownership of GKN Aerospace.

The company said the demerged group - which will effectively become an automotive platform - will have a dual strategy of profitable organic growth as well as targeted M&A in the automotive sector, where it sees opportunities as a consolidator either via an all-cash acquisition or a share-based transaction.

News of the planned demerger came alongside the company’s results for the six months to 30 June, which it said were at the higher end of expectations.

On an adjusted basis, pre-tax profit rose to £128m from £114, while revenue grew to £3.9m from £3.7m. On a statutory basis, the company’s pre-tax loss widened to £358m from £275m in the same period a year earlier, while revenue rose to £3.6m from £3.4m.

Chairman Justin Dowley said: "Since acquiring GKN in 2018 we have reinvigorated each business to achieve its potential. The proposed demerger now gives each an exciting opportunity to individually grow shareholder value through organic growth and acquisition in both platforms.

"Meanwhile, we remain on track to meet our full year 2022 expectations with full inflation recovery and providing good momentum for the intended demerger in the new year."