GKN in £633m deal for Volvo aero business

ENGINEERING group GKN yesterday agreed the £633m purchase of <a href="http://www.volvocars.com/uk/Pages/default.aspx"; target="_blank">Volvo</a> aerospace division, expanding its presence in the fast-growing civil aircraft sector.

The FTSE 100 company said that it has been eyeing growth in a sector that is forecast to almost double in size over the next 20 years.

The company also issued a trading update which showed underlying sales up nine per cent.

GKN chief executive Nigel Stein said: “It [the deal] will propel GKN into the top 10 independent aerospace ... suppliers.

“We are already a market leader in aero structures, this makes us a leader in engine components too, a large and growing segment of the aerospace industry.”

The aerospace industry will now account for around 40 per cent of the company’s revenues.

Oriel Securities said in a note that GKN had made the deal at a good price.

“The deal has happened a fraction earlier than we anticipated, but at a cracking price.”

The deal will be funded by new debt and a share placing to raise £140m. GKN said it had been pursuing Volvo Aero for a number of years and had become closely engaged when Volvo said it was considering selling the business in November.

Stein said that the company would now take a break from the acquisition trail.

“We will be looking to generate cash and pay down debt,” he added.

For Volvo, the world’s second-largest truck maker, the sale completes an exit from an activity no longer seen as core to its operations.