GKN buys Volvo Aero for £633 million

In a statement to the London Stock Exchange early today GKN said the acquisition, which may be complete in the third quarter, will be funded by new debt and a £140million placing of new ordinary shares, representing some 5% of GKN's current market capitalisation.

Volvo Aero, with nearly 3,000 employees based in Sweden, Norway and the USA, designs, engineers and manufactures components and sub-assemblies for aircraft engine turbines.

Nigel Stein, Chief Executive, GKN plc, said: “This is a highly attractive acquisition for GKN creating a market leader in aero engine components.  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.” 

In fact, the move puts GKNs offering straight into the top tier with an engine business to match its already successful aero structures business. Within aero engines, GKN’s composite leadership together with Volvo Aero’s strong metallic technology provides a unique offering to customers who are “focused on lightweight, high performance engine solutions.”  Volvo Aero has strong life-of-programme positions on existing platforms and a pipeline of new technology, offering a long-term revenue stream and opportunities for growth, the company said.

The company expects Volvo Aero's sales to be around £ 670million this year with the transaction expected to enhance GKN's earnings per share on a management basis and to generate a return on invested capital that exceeds the Group's pre-tax weighted average cost of capital of 12%.

This transaction supports the growth strategy of GKN Aerospace, increasing its pro forma 2011 sales to more than £2 billion, of which two thirds would have been to the civil aerospace market.  On the same pro forma basis, GKN Aerospace would have represented around 31% of GKN Group sales and 37% of Group trading profit.

Nigel Stein added: “Volvo Aero has invested heavily to secure positions on new engine programmes, offering a long-term platform for growth.  Its strong standing with customers, together with its skilled workforce and high quality engineering team, will be a valuable addition to GKN Aerospace.”