GKN automotive business floats on London Stock Exchange

The automotive arm of GKN has floated on the London Stock Exchange, in a boon for the market as it struggles to attract international companies.

The newly-named Dowlais, which makes parts for vehicles, from side-shafts for cars to specialist axles for electric models, was valued at £2bn with its shares rising 11 per cent on Thursday on the first day of trading.

The business was acquired by listed turnround specialist Melrose Industries as part of its controversial $11bn 2018 deal to buy struggling engineer GKN.

Listing the business means breaking up the historic GKN, which also owned an aerospace arm.

Dowlais chief executive Liam Butterworth told the Financial Times that the decision by Melrose to list the company in London made sense as it was “technically a demerger” and the majority of Melrose inventors were based in the UK.

“GKN is a traditional British engineering company with a really long heritage, longer than the London Stock Exchange itself, so we’re really proud to be bringing it on to the stock market in the UK,” he added.

Simon Peckham, chief executive of Melrose, recently credited the London market for being a leading factor in the FTSE 100 conglomerate’s growth with investors supporting its equity raisings.

The initial public offering comes at a time of growing pressure on the London market to compete with global rivals, after several high profile businesses opted to float internationally.

Arm, the British chip giant whose shares traded in the UK before its 2016 acquisition by SoftBank, has decided to list shares in the US.

The decision was a blow given pressure from several successive UK prime ministers to attract the Cambridge-based group to London.

Last month CRH, the world’s largest construction company, also chose the US over London, in part because investors offer higher multiples, while a top fund manager described the London market as “a backwater” among international equity markets.

Butterworth said the Dowlais listing gave the business the freedom to do takeover deals with rivals, though the company had to “earn the right” to do future deals, a process that could take several years.

Several of its target companies are likely to be in the US, where the group already has significant operations. Under Butterworth, Dowlais has shifted its global footprint to allow it to offer the same products in every region while complying with increased trade barriers including the new US Inflation Reduction Act.

The Dowlais demerger leaves Melrose with GKN’s aerospace business, which Melrose aims to grow to making £1bn of profit in the coming years.