A £78m merger announced this week between GKN’s armoured vehicles division and its Midland rival Alvis will open a new chapter in the history of defence industry restructuring.
The merger will help safeguard the future of Alvis, but some redundancies look inevitable as the two companies bring together their respective armoured vehicle operations.
The joint statement, issued on Tuesday, said annual cost savings of more than £5m are expected from the move.
GKN will have a 29.9% stake in the new Alvis, for which current Alvis boss Nick Prest will be chairman and chief executive. GKN chief executive CK Chow will sit on the board of the enlarged Alvis, as will David Wright, managing director of GKN’s defence activities.
Three weeks ago, GKN reported nine-month operating profits of £13m. GKN’s defence networking capital liabilities of £15m will now be assumed by Alvis.
Alvis employs 300 people in Coventry where its vehicles business is based.
The company has already played an active part in industry consolidation, having bought Hagglunds, the Swedish maker of armoured vehicles, in a £75m cash and shares deal last year.
Analysts said the deal has worked out well for Alvis, giving it access to markets where it had no previous operations.
The acquisition has also diverted attention from Alvis’s part in a failed bid for the multi-billion pound contract to supply multi-role armoured vehicles to several European armies.
The contract to make several thousand of the so-called ‘battlefield taxis’ went to the Eurokonsortium group, which includes GKN, MAk and Krauss-Maffei/ Wegmann of Germany, and GIAT from France.
Alvis said its share in the battlefield taxi project was relatively small and that there would have been no substantial revenue flows from the project until at least 2005.
Meanwhile, the company is set to pick up work as a result of the Ministry of Defence’s plan to fit diesel engines to the British Army’s 1,300 Scorpion family of fighting vehicles.