GKN completes £630m acquisition of Volvo Aero
MIDLANDS-based engineering group GKN has completed its £630m acquisition of Volvo Aero, the aero engine division of AB Volvo.
Volvo Aero designs, engineers and manufactures components and sub-assemblies for aircraft engine turbines. It supplies all the major aero engine manufacturers and has positions on most major civil aerospace platforms which are set to increase as aircraft build rates ramp up. The business around 3,000 people based in Sweden, Norway and the United States.
GKN said the operation had strong positions on existing platforms and a pipeline of new technology. It also offered a long-term revenue stream and opportunities for growth.
“The combination of GKN Aerospace and Volvo Aero creates a world leader in both aero structures and aero engine components,” said the Redditch-based group in a statement.
“Within aero engines, GKN’s composite leadership and Volvo Aero’s strong metallic technology together provide a unique offering to customers who are focused on lightweight, high performance engine solutions.”
The group said it now looked forward to “an exciting future combining our world class capabilities”.
For the year ended December 31, 2011, AB Volvo reported audited results attributable to Volvo Aero of sales of SEK6.5bn (£600m), EBITDA of SEK0.8bn (£75m, EBIT of SEK0.3bn (£30m) and gross assets of SEK9.3bn (£855m). In 2012, GKN expects Volvo Aero’s sales to be around SEK7.3bn (£670m) with EBITDA anticipated to be approximately SEK1.1bn (£100m). The acquisition enterprise value equates to an expected 2012 sales multiple of 0.9 times and an expected Volvo Aero 2012 EBITDA multiple of 6.3 times.
In 2013, the first full year of ownership, the deal is expected to enhance GKN’s earnings per share on a management basis and to generate a return on invested capital exceeding 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.
