Following the disposal of Ergotron, Melrose Plc has now completed four transactions since 2005 with an average IRR of 28%. Focus now turns to the fifth deal, GKN Aerospace. Recovery in the aerospace market and management confidence to lift margin expectations from 12% to 14%+, along with greater disclosure on the engine contracts, suggest GKN is recovering strongly, albeit value realisation is likely a few years out. In the shorter term, the fully restructured GKN Powder Metallurgy and GKN Automotive operations are likely to be exited, which should provide further support to Edison Group’s 246p/share valuation compared to a current value of 164p/share.
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