Engineering and manufacturing giant GKN is planning sell off parts of its business to fund a £2.5 billion windfall for shareholders as it continues to fight off a £7.4 billion hostile takeover bid by Melrose.

The Redditch-based group said it would make the payouts over the next three years, with a "significant part" of that cash raised by offloading a number of its non-core operations over the next 12 to 18 months.

That will include the sale of its Powder Metallurgy business which reports say could be valued at over £2 billion.

There are expected to "minimal job losses" as the programme gets under way, according to GKN's stock market announcement, "but there will be an adjustment in working practices required to adopt the leading edge technologies".

It is unclear how many of GKN's near 5,500 UK workers may be affected.

The company employs around 55,000 staff worldwide.

Birmingham-based turnaround investor Melrose tabled a bid for GKN in January which was rejected .

The company specialises in the aerospace and automotive sectors, making parts for companies such as Porsche, Volvo, Airbus and Jaguar Land Rover.

GKN is now also launching a dividend policy aiming to pay out 50 per cent of its free cash flow between 2018 and 2020 and said it would introduce "distinct strategies" and "focused performance targets" for its different business segments to help deliver a recurring annual cash benefit of £340 million from 2020.

Chief executive Anne Stevens said: "The new strategy brings clarity, accountability and focus to GKN's world-class businesses and will allow the group to attain world-class financial performance.

"We have strong market positions and have delivered good growth, with management revenues last year of over £10 billion.

"But too often we pursued growth at the expense of returns, this will no longer be the case."

The plan is the result of a "wide-ranging and strategic" review of the business that was launched last month after the company was approached by Melrose.

Melrose responded to this latest twist today by saying: "GKN's document is long on adjectives and promises but desperately short on detail.

"It is a stark admission of management failure combined with a series of promises which fall well short of what Melrose is proposing.

"Today's 'killer fact' is that GKN is waving the prospect of a £2.5 billion cash return to shareholders 'over the next three years' funded mostly by a sale of Powder Metallurgy.

"Melrose has already added £1.3 billion to the value of GKN and proposes a further £1.4 billion on day one.

"We would keep Powder Metallurgy for further improvement and use our proven skills to transform the core businesses of GKN while delivering growth and shareholder return at the fast-growing Nortek.

"In terms of value, the two proposals are worlds apart."