LONDON—GKN PLC has agreed to buy the Netherland's historic
Fokker Technologies Group BV as the British engineering company
deepens its bet on the aerospace sector.
The British supplier of plane parts to Boeing Co. and Airbus
Group SE said it would buy Fokker for €706 million ($779.98
million), including debt, from private-equity owner Arle
Capital.
Fokker, which dates back to the earliest days of flight, was one
of the world's largest plane makers before it entered bankruptcy in
the 1990s. The company's plane parts business, which was later
revived, is what is now being sold.
Back in 2012 GKN acquired Volvo's aircraft engine unit to boost
its aerospace activities after making a big bet on the sector in
2008 by purchasing some of Airbus's manufacturing operations in
Filton, England. Demand for plane parts has been booming as Boeing
and Airbus have built record order books for commercial planes amid
global growth for carriers and demand for more fuel efficient
planes.
"Aerospace has been our top priority for acquisitions," said
Chief Executive Nigel Stein.
GKN said the deal would expand the company's activities in plane
structures and bring it into the plane wiring business. It will
also expand the company's aerospace activities in the growing
Chinese market, Mr. Stein said, as the company's combined aerospace
sales reach about £ 3 billion annually.
Investors cheered the move, sending GKN shares up more than
4%.
Fokker brings with it strong contractual positions on new
programs such as the Airbus A350 long-range jet, which is early in
its production run and the Lockheed Martin Corp. F-35 Joint Strike
Fighter, the Pentagon's most expensive plane program.
The Dutch unit notched sales of €758 million in 2014 and a
margin of around 7%. Mr. Stein said profitability should rise in
the next three years.
The deal comprises a €500 million cash consideration and
assumption of liabilities totaling €206 million. GKN said it
intended to part finance the acquisition through a £ 200 million
pound share placing.
The Fokker deal isn't without risk. The Dutch company remains in
dispute with the U.S. government over an unlawful transaction with
Iran that violated sanctions.
GKN Chief Financial Officer Adam Walker said "we feel
comfortable that there that is no material ongoing liability or
risk for GKN as part of this." The timing of the purchase wasn't
related to a recent nuclear accord between Western governments and
Iran that raises the prospect for an end to sanctions, he said.
GKN said it expected the deal to add to its earnings already
this year, though it also faces around £ 35 million in integration
costs in 2015 and 2016. Job losses would likely be part of the
savings the company expects to generate in the coming years, Mr.
Stein said. The savings should reach 3% of sales, the company
said.
Mr. Stein said it was too early to say if some of Fokker
Technologies's businesses would later be sold.
GKN and Arle said they expected the deal to close at the end of
the year, pending regulatory approval, including from the U.S.
Separately, GKN said for the six months to June 30, the company
that also makes automotive parts, reported a pretax profit of £ 212
million, down from £ 224 million in the same period a year earlier.
Revenue for the half year rose by 1% to £ 3.62 billion.
Profit, before tax and certain exceptional items, rose by 4% to
£ 307 million. It declared an interim dividend of 2.9 pence per
share, up 4% from 2.8 pence paid a year ago.
Mr. Stein said the company remained committed to its automotive
activities and would invest and make deals if the right
opportunities arise.
Tapan Panchal contributed to this article.
Write to Robert Wall at robert.wall@wsj.com
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