GKN Westland Helicopters of the UK and Italy's Agusta are to merge, giving the as-yet unnamed venture the critical mass to compete with its bigger rivals in Europe and the USA.

The merged company could be the second largest rotorcraft manufacturer in the world by the time the deal is finalised next year.

Westland, in particular, expects to see its turnover rise about 80% this year to nearly £1 billion ($1.63 billion) as EH-101 and AH-56 Apache production shows up on its balance sheet. The fortunes of Agusta have also picked up markedly, with new products and an alliance with Bell Helicopters on developing tiltrotor aircraft.

Parent companies GKN and Finmeccanica have been discussing a merger for nearly a year and, having signed a heads of agreement on a 50:50 joint venture, will begin due diligence before finalising the deal.

Based on an estimate of their combined turnover for 1998, Yeovil-based Westland and Agusta, of Cascina Costa, northern Italy, would rank as the fifth-largest manufacturer behind Bell, Boeing, Eurocopter and Sikorsky.

Westland sources do not rule out further consolidation in the medium term, saying this is just as likely to involve transatlantic deals as European ones.

The new venture will comprise Westland, the transmissions business of Westland Aerospace and GKN's 50% interest in Aviation Training International (an Apache support business), plus Agusta, its transmissions and structures business, its share in the NH90 utility helicopter, and BA609 tiltrotor and AB139 joint ventures with Bell.

Westland is the larger of the two, with a turnover of £500-600 million. Agusta has turnover of £300-400 million.

GKN executive director David Wright will chair the merged venture. Chief executive will be Amedeo Caporaletti, president and chief executive of Agusta.

At the heart of the Westland-Agusta merger is the jointly developed three-engined EH101 medium-lift helicopter. Westland's other business includes construction under licence of Boeing's WAH-64 Apache and upgrades of its own Super Lynx and Sea King. Agusta makes the A109, A119 and A129, and is developing the AB139 and BA609 with Bell and the NH90 with Eurocopter and Fokker.

Source: Flight International