UK aerostructures firm GKN is to acquire aero engine supplier Volvo Aero under a SKr6.9 billion ($1 billion) agreement, giving it a strong presence in the propulsion sector.
Volvo Aero designs and manufactures components for several powerplant types on major programmes.
GKN says the acquisition, which it expects to complete in the third quarter, comprises SKr5.6 billion equity value plus a working capital refinancing and a pension settlement.
It adds that the deal will be financed with new debt and a £140 million ($218 million) issue of new shares - around 5% of GKN's market capitalisation.
Volvo Aero employs around 3,000 personnel in Sweden, Norway and the USA.
"This is a highly attractive acquisition for GKN creating a market leader in aero engine components," says GKN chief Nigel Stein, adding that the takeover will "significantly enhance" the company's engine components activity.
Volvo Aero's sales this year will be in the region of SKr7.3 billion, GKN says, with earnings of some SKr1.1 billion.
It adds that Volvo Aero's operating margin is "expected to meet" GKN's target range of 11-13% in 2013, the first full year of ownership, following "operational process improvements and cost savings", totalling 3-4% of Volvo Aero sales by 2014.
"Volvo Aero has invested heavily to secure positions on new engine programmes, offering a long-term platform for growth," Stein adds.