Shares in GKN (LON:GKN) have spiked nearly three percent in London this morning, amid reports that the company is looking at plans to split itself in two. The news follows the engineering group’s recent profit warning.
As of 09:36 BST, GKN’s share price had added 2.93 percent to 312.30p, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.05 percent higher at 7,526.99 points. The group’s shares have lost more than four percent of their value over the past year, and are down by some five percent in the year-to-date.
GKN mulls over plans to break up
The Sunday Times reported yesterday that GKN was examining a radical break-up plan, splitting its aerospace and automotive businesses. The newspaper notes that a split would unpick a merger struck in 1902 when Guest, Keen & Co staged a hostile takeover of Nettlefolds to create GKN. While a number of hurdles stand in the way of any split, it is understood a break-up could happen within months.
The news comes after GKN recently warned on profits, noting that its aerospace segment had “seen a significant reduction in margin caused by pricing pressures, continuing operational challenges and the impact of programme transitions”.
Analysts on potential split
The Times meanwhile noted today that analysts would like the automotive unit to be spun off from aerospace and powdered metallurgy, which they believe would deliver shareholders an automatic premium, as aerospace companies are more highly rated. A split, however, could see both new companies drop out of the FTSE 100.
In ratings news, Liberum lifted its rating on GKN to ‘hold’ today, valuing the shares at 300p. According to MarketBeat, the engineering giant currently has a consensus ‘buy’ rating and an average price target of 387.08p.