Anne Stevens, previously interim CEO, has agreed to take on the position of CEO with immediate effect.
The company's autos unit, which makes drivetrain components, accounts for nearly half of sales versus just over a third from aerospace, though the latter generates more profit at 44 percent of the total.
In November, the company announced that its CEO designate Kevin Cummings was leaving the company with immediate effect following a profit warning brought about by difficulties on U.S. aerospace operations.
Engineering company GKN is long established in the United Kingdom and internationally with aerospace and automotive operations. The offer would have resulted GKN shareholders owning 57% of the combined company and and Melrose shareholders holding 43%.
Melrose said its cash-and-share offer is aimed at reversing GKN management's history of "not delivering on margin targets", and improve its businesses before a breakup, enabling them to exceed current profitability goals.
The GKN board described the Melrose offer as "entirely opportunistic" adding that "the terms fundamentally undervalue the Company".
The offer comes at a delicate time for GKN, which said in November it was firing its incoming chief executive officer before he even started amid mounting write-offs related to a troubled aerospace plant in Alabama.
One shareholder in Melrose, who also previously used to own stock in GKN, said "good assets, bad management" had always been the story at GKN. "I am relishing the challenge of delivering that potential with a new group-wide improvement programme underway". The former Ford Motor Co. executive, 69 will oversee the planned split, creating two companies with "distinct investment profiles and capital allocation policies", it said.
While that plan does not yet entail a full separate listing, it could make one possible in the future.
Meanwhile, GKN said its Board will communicate further details on the optimal method of separation in due course.
The split is likely to trigger bid interest in both businesses, bankers said.
Involving paper in its GKN bid is a departure from its usual strategy of raising funds for acquisition through rights issues. It carried net debt of around £700 million as of June 30th, 2017.