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.
GKN shares rocketed 13% today after it finalised a deal to buy the aero-engine arm of Swedish truck-maker Volvo for £633 million.
That was less than the market was expecting it to pay for a takeover that had already been widely welcomed.
GKN’s chief executive, Nigel Stein, said the deal was, “a highly attractive acquisition... creating a market leader in aero engine components”.
The City seems to agree. Oriel Securities said in a note: “This is a defining moment for GKN, with aerospace now set to account for 40% of earnings. The deal has happened a fraction earlier than we anticipated, but a cracking price... and a placing of just 5% (of GKN’s existing equity). Our assumption was £700 million and 10%.”
The deal will give GKN more exposure to the civil aircraft sector, offsetting falling sales as governments cut back on defence spending.
The shares jumped 24.7p to 211.3p.
Stein said of the deal: “It 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.”
GKN said the payment broke down into £513 million for the business, plus a pension settlement of £50 million and refinancing of £70 million. Stein said after a string of acquisitions, there would be a pause.
