Shares in British engineering group GKN jumped more than 26% on Friday after the company announced it had received an unsolicited bid from Melrose, the investment group.
In an announcement to the London Stock Exchange on Friday, GKN confirmed that it received a "preliminary and unsolicited proposal from Melrose to acquire the entire issued, and to be issued, share capital of GKN at a price of 405p per share".
The proposal included a breakdown of the funding of the deal, whereby 80% would be in new Melrose shares and 20% in cash.
At 405p a share, the deal would represent a 24% premium to GKN's closing price on 5 January - the day before the offer - and would value GKN at close to £7bn.
Melrose Industries specialises in taking over troubled or underperforming industrial groups.
GKN said that under the terms of the proposal, GKN shareholders would have held around 57% of the enlarged company, plus 81p in cash, taking the 218p share price of Melrose on 5 January into account.
GKN rejected the proposal, saying: "The Board of GKN has considered the proposal together with its financial advisers, Gleacher Shacklock, JPMorgan Cazenove and UBS Limited, and has unanimously rejected it, having concluded that the proposal is entirely opportunistic and that the terms fundamentally undervalue the company and its prospects."
Under the stock market rules, Melrose is now required to either announce a firm offer by 5pm on 9 February, or announce that it is no longer interested.
Shares in GKN jumped 26.5% to 417p after the announcement of the proposal from Melrose.
Shares in Melrose Industries were 10.71% higher at 238.1p in early trade on the London Stock Exchange.
GKN also announced on Friday that it had appointed Anne Stevens (left) as chief executive with immediate effect. She had previously been interim CEO.
Chairman, Mike Turner, said: “The Board believes that Anne Stevens has the track record to transform GKN. After a successful turnaround of The Ford Motor Company’s businesses in Mexico, Canada and South America, she was appointed as chief operating officer for the Americas where she developed the transformation plan for Ford’s US business."
The company also took the opportunity to publish its pre-earnings statement, in which it said fourth-quarter trading had been in line with expectations.