Melrose Plc’s demerger of the automotive businesses and the listing of separate entities (NewCo and Melrose with Aerospace) will provide greater transparency of valuation. Using listed peer ratings for the two entities, we estimate a combined valuation per current Melrose share of c 200p. In addition, both companies will be able to accelerate their strategic pathways with greater potential access to capital markets. Melrose shares have declined 25% since the announcement of the demerger despite management reiterating full year expectations, suggesting some disappointment that a clean sale of the Automotive business and cash return has not been achieved. This has significantly increased the upside potential value realisation.
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