European competition authorities approve GKN’s acquisition of Volvo Aero

The European Commission (EC) said it had ruled in favour of the planned SEK6.9bn (USD1bnm/EUR818m) acquisition of Volvo Aero by British engineering group GKN Plc (LON:GKN), after concluding that the combination would not hurt competition in the European Economic Area (EEA).

GKN announced in early July the agreement to buy the aerospace engine components business of Swedish commercial transport solutions group AB Volvo (STO:VOLV B), saying it would be a substantial addition to GKN Aerospace’s engine components operations. The combination would give GKN Aerospace a top position in this sector to complement its leadership in the composite aerostructures segment, the buyer has said.

In its statement, the EC said it had focused its review of the deal on the overlaps between the two companies’ operations in the production of certain aircraft engine components and decided that the transaction would not substantially limit supply options for customers.

The regulator has found that the merger would not impede competition in the markets for fan cases and turbine exhaust cases (TECs), as there are sufficient other manufacturers present in these sectors and many of the customers have the capacity to produce these components in house, it explained.

GKN sees the deal to contribute to its EPS in 2013 and to deliver a return on invested capital higher than its 12% pre-tax weighted average cost of capital, it has said.

The buyer will use new debt and proceeds from a new shares placement to fund the acquisition, which it initially expected to wrap up in the third quarter of 2012, pending regulatory approvals.