Engineering Giant In £800million Deal

Engineering giant GKN was today reported to be on the brink of an £800 million deal to buy Volvo's aircraft business.

The swoop by GKN, which employs 40,000 people and has operations across the UK, would represent one of the biggest acquisitions by a British manufacturing firm since the banking crisis.

The Sunday Times said Redditch-based GKN was now the frontrunner for the Volvo arm after Germany's leading engine maker, MTU Aero Engines, dropped out of the auction process started by Volvo in November.

The addition would represent a major boost to GKN's aerospace division, which last year recorded sales of £1.5 billion and is a supplier of aircraft components to both Airbus and Boeing. Its biggest division is automotive, which makes parts for many of the world's big carmakers.

The Volvo business up for grabs makes the RM12 engine for Saab's Gripen fighter jets, used by the Swedish military, as well as supplying engine components to the three main engine manufacturers, including Rolls-Royce.

The deal could signal the start of a spending spree in the industrial sector, with major players such as the American giants GE, Dover and Honeywell sitting on huge war chests built up during the economic slowdown.

It was also reported that GKN's wheels business, which makes components for construction vehicles and other heavy plant, is up for sale in a move that could generate about £130 million.

Last month GKN reported a 15% increase in full-year pre-tax profits to #417 million, on sales up 13% to £6.1 billion.
The aerospace arm's UK operations are based in locations including Yeovil, Luton, Derby, Portsmouth and the Isle of Wight.

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