Shares in GKN, one of the UK’s biggest engineering firms, have soared after the item rejected a bid which values the company at £7bn.
Melrose made the unsolicited offer of 405p a share on 8 January.
Shares in GKN, which makes wing tips for Airbus planes along with also also parts for Porsche cars, closed more than 26% higher at 420p.
Its board said the cash along with also also shares bid was “entirely opportunistic” along with also also “fundamentally” undervalued GKN.
Shares in Melrose, a manufacturing turnaround firm, also rose sharply, adding 7% to 229p. Takeover rules mean the item must make a firm offer by 9 February or walk away for six months.
Liberal Democrat leader Vince Cable called on Business Secretary Greg Clark to block the takeover: “GKN stands for long term investment in advanced manufacturing whereas Melrose are within the business of short-term financial engineering.”
Last year, lower profit margins along with also also cash generation prompted GKN to conduct a wide-ranging review of its business. The company also warned on profits after uncovering problems at its aerospace division.
On Friday, the item said a brand-new two-year strategy called Project Boost might significantly increase cash flow by cutting costs along with also also expenditure along with tighter pricing control.
the item also announced plans to split its aerospace along with also also automotive divisions into separate companies, although the timing has not been confirmed.
Nicholas Hyett, an analyst at Hargreaves Lansdown, said the split had been “on the cards for years” because there was little crossover between the two businesses.
“Historically, the pension deficit has held the group together, however with the sprawling footprint likely to have contributed to recent profit warnings, the reasons for divorce at This specific point seem to outweigh the costs of splitting,” he said.
“The money to be made by a split can be likely to have been what drew turnaround specialist Melrose to the table within the first place.”
GKN said on Friday which Anne Stevens, its interim chief executive, might remain within the role permanently.
Kevin Cummings had originally been due to take up the role on 1 January, however in November the company announced the item was looking for “alternative leadership”.
The decision followed a £130m writedown in GKN’s aerospace division, which Mr Cummings had been running.
“Operational challenges” at its North America-based aerospace business were one factor behind a profit warning in October.
The aerospace division was bolstered in 2009 when GKN bought the Airbus wing manufacturing along with also also assembly plant at Filton, near Bristol, along with also also Fokker Technologies in 2015.
The company’s origins can be traced back to the Dowlais Iron Co, near Merthyr Tydfil in South Wales, in 1759. The town’s ironworks supplied rails to railways within the UK along with also also abroad, generating the item the entire world’s largest by 1845.
The Patent Nut & Bolt Company, founded in Birmingham in 1856, was combined with Dowlais in 1900 in a brand-new group called Guest, Keen & Co.
Two years later, the item took over Nettlefolds Ltd to become Guest, Keen & Nettlefolds.
GKN was heavily involved in wartime production within the first half of the 20th Century, during which time the company made its first move into the emerging motor industry.
Melrose specialises in buying up under performing companies.
The firm first listed in 2003 which has a value of £13m, however within the 15 years since then its value has rocketed. Today the FTSE 250 company can be valued at almost £4.4bn.
Its acquisitions have included Dynacast, which the item bought by private equity firm Cinven in 2005 along with also also sold six years later for four times its original investment.
In 2012 Melrose bought utility metering firm Elster for £1.8bn along with also also sold the item three years later to Honeywell for £3.3bn.
Last August the firm acquired US company Nortek for £2,2bn.