GKN is this weekend teetering on the edge of the FTSE 100. Shares in the engineering group took a battering last week after a downbeat set of results and a £150m restructuring programme that could lead to 2,000 job losses.

Its closing price of 255p put it at number 109 in the list of quoted companies ranked by market value. The timing could not be worse — the quarterly review of the index is on Wednesday. If GKN slips two more places, it will be automatically expelled from the elite club. It received a little extra push towards the door on Friday evening when Moody’s, the credit-rating agency, said it was considering a downgrade of GKN’s debt.

Expulsion from the FTSE 100 would be more than a bit harsh. GKN remains one of Britain’s few top-quality engineering companies. Profits were marginally down on last year, thanks to increased pension costs, but were still in line with forecasts. The costly restructuring of the drivetrain business, which will see large chunks moved to India, China and Mexico, is a sign of the times in the automotive world.

Carmakers are constantly pushing for price cuts, and actively lobbying for key suppliers like GKN to move to low-cost countries. Management can hardly be blamed for doing what its biggest customers want. It claims the revamp should bring benefits of £60m a year within three years.

GKN is also big in aerospace, and its expertise in making composite aircraft parts means that it should be a big winner from Boeing’s new 7E7 airliner programme.

The shares look oversold and justify a price nearer 300p. Buy.

MMO2/KPN

THE CITY is still abuzz with speculation that KPN, the Dutch telecoms group, is working on a new bid for MMO2. Andrew Beale of Arete Research has proposed an intriguing alternative. Shareholders would be much better off if the British mobile company bought KPN.

In a note entitled Mr Topsy Turvy, Beale argues: “When KPN sought to merge with MMO2, it was a case of a lowly rated company buying a higher-rated one, diluting shareholders. The rationale for merging two Mr Smalls into a Mr Strong are clear, but KPN’s proposed structure was destined to make its shareholders Mr Grumpy.”

Better, the logic runs, to issue highly rated MMO2 shares to acquire KPN and take advantage of the enormous £3.3 billion of synergies — mainly from eliminating duplicated network spending in Germany. KPN has more than £5 billion of debt, but the strong earnings from its fixed-line business allow it to support more — so enabling it (or the enlarged group) to pay a large special dividend to shareholders before spinning off the fixed operations.

If MMO2 shareholders can claim half the benefits of the deal, Arete’s estimate of the company’s value rises to 137p a share, compared with 111Äp on Friday. KPN does just as well. “If KPN cares about shareholders it should change advisers,” Mr Topsy Turvy says. “Fire Mr Silly, hire Mr Clever.”

There’s only one problem. It’s not going to happen. Peter Erskine, MMO2’s chief executive, has made clear it is too early for him to be making bold expansionist moves. Still, Mr Topsy Turvy does illustrate the expanding strategic options open to MMO2. Hold the line.

Citywire reveals secret City deals

Jarvis shareholders breathed a sigh of relief on Thursday when the public-sector contractor rebuffed claims that a big schools contract in the northeast was turning sour. This followed news that it had secured £24m owed by National Rail. Hopes of this repayment had been widely dismissed.

Top New Star fund manager Stephen Whittaker chose to believe the group’s claim that the debt would be settled. Whittaker, who has an AA-rating from Citywire for his superb risk-adjusted performance, picked up 750,000 shares, or 0.5%, for the New Star UK Growth fund last month at an average price of about 140p. He is betting the shares will continue to rise as Jarvis keeps pulling away from its bad press.