Volvo sells aerospace unit to Britain's GKN
Published: 05 Jul 2012 11:18 GMT+02:00
Updated: 05 Jul 2012 11:18 GMT+02:00
Sweden's Volvo AB announced on Thursday it was selling its Volvo Aero aerospace engine subsidiary to British vehicle engineering group GKN for 6.9 billion kronor ($987 million).
“GKN is a strong new owner for Volvo Aero,” Volvo CEO Olof Persson said in a statement.
“GKN will provide Volvo Aero with the best possible conditions for continued advancement in its industry.”
According to Volvo, the transaction is set to be completed during the third quarter of 2012 and is expected to generate around 400 million kronor in capital gains, as well as add about 200 million kronor to Volvo Group's third quarter earnings.
The Swedish maker of heavy vehicles has been looking to offload Volvo Aero since November 2011 in order to focus on its core product line.
The sale to GKN is also expected to wipe around 5 billion kronor in debt off Volvo Group's debt.
“Volvo Aero has attracted considerable interest, but in our opinion, GKN can offer the best conditions for Volvo Aero’s future advancement,” said Persson.
“This transaction will improve our chances to further refine and develop our core business in commercial vehicles, while providing Volvo Aero with an owner that has both the drive and the capacity to advance and strengthen the company.”
GKN also hailed the deal and offered assurances that the company had no plans to reduce current Volvo Aero operations in Sweden, the TT news agency reported.
"The combination of GKN Aerospace and Volvo Aero creates a world leader in both aero structures and aero engine components," it added.
GKN's share price rocketed 13.61 percent following the announcement in early trading on London's benchmark FTSE 100 index, which was flat overall.