GKN plc (Isle of Wight, U.K.) on July 5 announced its agreement to acquire Volvo Aero (Trollhättan, Sweden), the aero engine division of AB Volvo (Gothenburg, Sweden). Volvo Aero designs, engineers and manufactures components and subassemblies for aircraft engine turbines. It supplies all the major aero engine manufacturers and has positions on most major civil-aerospace platforms — positions expected to strengthen as aircraft build rates ramp up. Volvo Aero employs some 3,000 people based in Sweden, Norway and the U.S.
Nigel Stein, chief executive, GKN plc, says, “This is a highly attractive acquisition for GKN, creating a market leader in aero-engine components. With excellent technology and strong life-of-program positions on most civil aero engines, Volvo Aero will significantly enhance GKN Aerospace’s engine components business.”
The acquisition enterprise value is SEK6.9 billion ($985 million USD) comprising SEK5.6 billion ($800 million) of equity value (consideration) together with an anticipated Volvo Aero pension settlement ($77.5 million) and working capital refinancing ($108.6 million). The acquisition is expected to be completed during the third quarter of this year, subject to regulatory approvals. It will be funded by new debt and a $217.2 million placing of new ordinary shares, representing approximately 5 percent of GKN’s current market capitalization.
GKN says the combination of GKN Aerospace and Volvo Aero creates a world leader in both aerostructures and aero engine components. 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.
Stein adds, “Volvo Aero has invested heavily to secure positions on new engine programs, 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. GKN Aerospace will now be a leader in the aero engine sector, complementing its leading position in composite aero structures.”