Engineering group GKN has flatly rejected an unsolicited £7 billion offer for the company from turnaround investor Melrose as it appoints a new chief executive.

The Redditch-based company told the London Stock Exchange today it had received "a preliminary and unsolicited proposal" on Monday to acquire the entire share capital at a price of 405 pence per share.

The deal would have comprised 80 per cent in new Melrose shares and 20 per cent in cash.

GKN's statement said it considered the proposal with its advisers but decided to "unanimously reject it" on the grounds it was entirely opportunistic and the terms fundamentally undervalued the company and its prospects.

Melrose told the Stock Exchange today it believed there would be significant operational and commercial benefits arising from its ownership of GKN's businesses, "reversing a history of existing GKN management not delivering on margin targets".

"Melrose expects to re-energise and re-purpose GKN's operations to enable them to exceed GKN's own top-end group trading margin target of ten per cent," it added.

Separately, GKN, which specialises in aerospace and automotive engineering, has confirmed interim chief executive Anne Stevens will take the post permanently with immediate effect.

Ms Stevens stepped into the role in November when Kevin Cummings, who was due to replace the retiring incumbent Nigel Stein, suddenly left the company.

At the time, the group was preparing for a further write off of up to £130 million in the aerospace division which Mr Cummings used to lead.

Comment: GKN shouldn't be splitting up 'brilliant' company

It had also previously expected to write off £15 million on its Alabama facility in the US, relating to "revised assumptions" on programme inventory and receivables balances, which sparked a wider review across the division.

Today's statement said: "Since her appointment, Anne has taken leadership of an ongoing and wide-ranging internal review of all GKN's businesses which has culminated in the development of a transformation plan to improve significantly GKN's performance."

Chairman Mike Turner added: "The board believes Anne 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.

"Her operational and strategic skills are ideally suited to GKN and the board is very impressed with the contribution she has made so far in setting out plans for a significant improvement in the group's performance."

Ms Stevens added: "GKN is a world leader with the potential to perform even better.

"We have been working extensively over the past few months to develop detailed cash and profit improvement plans.

"I am relishing the challenge of delivering that potential with a new group-wide improvement programme under way."

GKN also said today it planned to separate it aerospace and automotive businesses, recognising it opened up options shareholders in having separate companies with distinct investment profiles and capital allocation policies.