GKN shares rose by almost 25 per cent this morning to a near four-year high after the FTSE100 engineering firm rejected a £7 billion "opportunistic" takeover bid by Melrose, with the GKN board arguing the bid's terms "fundamentally undervalue" the firm and its prospects.
It also announced it was splitting its business into separate aerospace and automotive arms.
The Melrose share and cash offer had come on Monday, worth 405p a share, itself thought to represent a 24 per cent bid premium on GKN's share price at the end of last week (that in turn raises a question over the stock market valuation of GKN).
GKN has roots going back over 250 years and employs some 58,000 worldwide.
It was perceived by some as vulnerable to such a bid, having lost its aerospace boss Kevin Cummings late last year, who had been due to take over as GKN chief executive, after announcing it would have to write off overvalued inventory and unpaid bills in its US aerospace operation.
The firm's shares fell by 15 per cent last October.
Melrose now has until February 9 under UK takeover rules to make a firm offer or will have to wait six months before making a further bid.
Acting chief executive and non-executive director Anne Stevens (formerly of Ford in the US) will take over as chief executive.
She will not only split up the company but also put in place a restructuring to increase cash flow.
That will likely mean the selling off of 'non-core' operations. Quite where this leaves GKN Powder Metallurgy is a big question.
The former chief executive Nigel Stein had - rightly in my view - resisted splitting up the firm as he felt the expanding aerospace business provided a degree of security against the typically cyclical nature of the auto side of the business.
I would add to that justification the increasing overlap of aerospace and automotive technologies and the fact a bigger business is better able to resist takeovers.
Witness what happened to Cadbury after it separated from Schweppes.
After the November shock, the GKN board has been under intense investor pressure to change it position.
But, let's be clear, this is nevertheless a fundamentally well-run company and there is no need to change the management of the firm through a disruptive takeover or even, I'd argue, split it up.
GKN expects full-year profits to be slightly higher than last year's £680 million before accounting for the US aerospace write-off.
The latter will come in at the upper end of the range it has previously announced, meaning a hit of around £130 million.
GKN is one of the few genuinely global and competitive UK-based engineering firms which invests heavily in developing new technology.
It designs, manufactures and services components and systems that go into many of the aircraft, cars and machinery produced by the world's leading assemblers.
It has strong positions in many of the market segments in which it operates.
GKN Driveline, with its significant operation in Erdington, is, in my view, the crown in the jewels of the operation.
In 2016, GKN Driveline had sales of £4.2 billion and employs some 28,000 people worldwide, with manufacturing in over 20 countries.
It is the world's biggest maker of auto driveshaft equipment, supplying driveline products to many leading vehicle makers including front-wheel drive (FWD) and all-wheel drive (AWD) driveline components and systems including constant velocity joints (going right back to the days of Hardy Spicer), propshafts and, of late, eDrive systems technology.
Through investment in its eDrive technology the firm is well positioned for the forthcoming electric vehicle (EV) and hybrid revolution.
Over a quarter of GKN Driveline's engineering investment is going into electrified drivetrains.
In other words, the firm is investing heavily to develop the technologies needed in the future, such as through the application of its torque vectoring technology to electrified drivetrains (and last year the firm announced it was teaming up with the Panasonic Jaguar Formula E racing team).
I'm not at all sure the market is adequately valuing this investment at present.
There is a pretty stark contrast with the valuation of, say, the EV maker Tesla which isn't about current sales but rather the future. The same perspective isn't being applied to GKN.
Melrose's takeover bid and subsequent announcements again raise issues over UK takeover regulations.
A well run, indeed brilliant, UK-based engineering giant is splitting itself up in response to being 'in play' after a negative shock late last year. That shouldn't be the case.
Indeed, I am sceptical about the merits of splitting the firm up and feel that smaller, standalone units like GKN Driveline could in turn be vulnerable to take over down the line.
Some simple changes to takeover rules, as I have outlined many times here at the Birmingham Post and in my academic research, could enable firms like GKN to have more breathing space to think and invest long-term rather than to defend itself against hostile takeovers and focus on short-term cash and profits.
Professor David Bailey works at Aston Business School