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GKN acquires Volvo Aero for GBP633 million

6-Jul-2012 12:19 PM

GKN signed (05-Jul-2012) an agreement to acquire Volvo Aero, the aero engine division of AB Volvo, for a consideration of SEK6.9 billion (GBP633 million), comprising SEK5.6 billion (GBP513 million) of equity value (consideration) together with an anticipated Volvo Aero pension settlement (GBP50 million) and working capital refinancing (GBP70 million). Volvo Aero designs, engineers and manufactures components and sub-assemblies for aircraft engine turbines, with facilities in Sweden, Norway and the US. The acquisition is expected to complete during 3Q2012, subject to regulatory approvals. It will be funded by new debt and a GBP140 million placing of new ordinary shares, representing approximately 5% of GKN’s current market capitalisation. In 2012, GKN expects Volvo Aero’s sales to be around SEK7.3 billion (GBP670 million) with EBITDA anticipated to be approximately SEK1.1 billion (GBP100 million). In 2013, the first full year of ownership, the transaction is expected both to be enhancing to 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%. The Volvo Aero operating margin is expected to meet the GKN Aerospace target range of 11-13% in 2013 due to operational process improvements and cost savings, which are expected to total 3-4% of Volvo Aero sales by 2014. [more - original PR]