UPDATE 2-Bidder Melrose opposed to rapid break-up of GKN

* Melrose opposed to short-term split of GKN

* GKN responds with swift restatement of rejection

* GKN has new CEO after profit warnings last year (Adds more detail, response from GKN, hedge funds, and updates share price)

LONDON, Feb 1 (Reuters) - Melrose Industries said it would not pursue a "hasty separation" of GKN's automotive and aerospace divisions as it pressed the case for its 7.2 billion pound ($10.2 billion) hostile bid for the British engineer on Thursday.

The offer document drew a swift response from GKN which has urged its shareholders to reject the approach from turnaround specialist Melrose.

"This offer is derisory," Anne Stevens, the former Ford executive who became GKN chief executive last month, said in a statement, accusing Melrose of trying to buy it on the cheap.

GKN, whose roots date back to the 18th century, makes parts for the Boeing 737 jet, Black Hawk helicopter and components for Volkswagen and Ford cars.

It wants to pursue its own plan of separating itself into its automotive parts and aerospace divisions.

In a letter to shareholders on Thursday, Melrose Chairman Christopher Miller said while the two GKN businesses needed investment, splitting them up was not the best course of action.

"Any actions to immediately separate the businesses in preparation for a sale would be value destructive," he said.

Melrose said GKN shares had risen from 326.3 pence since it first approached the company last month, telling investors it had added 1.7 billion pounds in value. The shares traded at 427.5 pence by 0945 GMT.

The Financial Times reported last week that GKN had received several approaches for its individual businesses since the bid battle flared.

Melrose is attempting to snap up GKN after the engineer was left weakened by profit warnings in October and November, double blows that were both sparked by problems at its aerospace division and sent its shares sharply lower.


Melrose specializes in buying companies that it can improve through investment and cost cuts with the aim of selling them at a profit later.

Most recently, these have included U.S. ventilation and home security products maker Nortek. Melrose said last year it had improved margins at the business from 9.3 percent to 13.4 percent in four months.

Melrose said it would consider a variety of options for GKN's businesses once they had been improved, which could include sale or floatation.

The FTSE 100 company GKN now has 14 days to publish its detailed defense against the bid, and Stevens said this would include its own transformation plan.

"We remain committed to separation at the right time," she added, arguing that Melrose lacked relevant experience in high technology business and investing for the long term.

GKN had previously said a takeover by Melrose could hit its pension scheme.

Melrose's offer committed the firm to injecting 150 million pounds in cash to the pension scheme within 12 months of completion.

Melrose's offer for GKN consists of 1.49 new Melrose shares and 81 pence per GKN share and represented a value of 418.3 pence per GKN share, based on Wednesday's close. Melrose shares added 0.6 percent to 227.9 pence on Thursday.

Elliot, a hedge fund with 0.48 percent stake in GKN and a 0.2 percent short position in Melrose, declined to comment, as did London-based behemoth Man Group and Marshall Wace.

American computer-driven firm AQR was not immediately available for comment. ($1 = 0.7034 pounds) (Reporting by Emma Rumney. Additional reporting by Maiya Keidan and Carolyn Cohn; editing by Adrian Croft and Keith Weir)