Volvo Aero sold to GKN

Heavy trucks manufacturer Volvo Group (OMX: VOLV B) has agreed to divest its subsidiary Volvo Aero to global automotive and aerospace components company GKN plc (LSE: GKN) for an enterprise value of 6.9 billion SEK. This will result in a capital gain of around 400 million SEK for Volvo before deferred depreciation according to IFRS in Q3 of about 200 million. The group’s net debt will be reduced by 5 billion SEK. The expected forward sales multiplier for 2012 is 0.9 and EBITDA multiplier 6.3 as sales of around 7.3 billion and EBITDA of 1.1 billion are expected. Competition authorities’ approval is needed for the sale to go through. The transaction would create a worldwide leader in aero engine components. Expected closure is in Q3 2012.

Volvo Aero develops and manufactures components for aircraft, rocket and gas turbine engines. It also does extensive service and maintenance business in the field. The company is headquartered in Trollhättan and has production in Linköping, Sweden (Applied Composites AB ), Kongsberg, Norway, Newington, near Hartford, Connecticut, USA and product development in Bangalore, India with altogether some 3000 employees. Volvo Group started to try to find a new owner for the firm late last year. According to the group, it attracted plenty of interest but the feeling is that GKN is the one best positioned to further develop the company.