GKN acquires Volvo Aero Division for $1.1 Billion image

GKN Plc (GKN), a U.K. maker of parts for Airbus SAS jetliners, announced this morning that it is to buy the aero engine unit of AB Volvo -Volvo Aero – for $1.1 Billion.

Volvo Aero would boost the capacity and range of GKN’s engine component portfolio as demand in the commercial aerospace segment continues to grow.

“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.”

GKN is broadening a product range that already includes some engine components as airliner orders accelerate, with the deal taking aerospace sales to about 37 percent of the total, Chief Executive Officer Nigel Stein said on a conference call. For Volvo, the second-biggest truckmaker, the disposal marks the biggest structural shift since its car unit was sold in 1999.

“This is a defining moment for GKN with [its] aerospace [unit] now set to account for 40 per cent of [group] earnings” said Harry Philips, analyst at Oriel Securities.

GKN’s aerospace unit delivered a 13 percent rise in first-quarter profit, helped by the ramp-up of civil aerospace programmes, which have offset falling military sales.
GKN’s shares were 10.4 per cent higher at 206.1p.