Engineering group GKN has agreed to buy the aerospace division of the world's number two truck maker Volvo to boost the capacity and range of its engine component portfolio to meet booming demand.
Confirming a Reuters report from Wednesday, GKN said it would pay £633m for the aero engine division, comprising £513m of equity value, an anticipated pension settlement of £50m and working capital refinancing of £70m.
The deal will be funded by new debt and a placing of £140m, representing around 5 percent of GKN's current market capitalisation.
"This is a highly attractive acquisition for GKN creating a market leader in aero engine components," GKN Chief Executive Nigel Stein said.
"With excellent technology and strong life-of-programme positions on most civil aero engines, Volvo Aero will significantly enhance GKN Aerospace's engine components business."
The purchase will give GKN a higher proportion of sales to the civil aircraft industry at a time when many Western governments are slashing defence spending to rein in budget deficits.