GKN benefits from business swap deal

GKN pocketed a £77m profit last year after concluding a joint-venture agreement with US-based Dana Corporation. The deal will lead to the setting up of a combined driveline systems business in the US. Under the terms of the agreement, however, the two groups are to exchange several businesses that will allow each to focus on […]

GKN pocketed a £77m profit last year after concluding a joint-venture agreement with US-based Dana Corporation.

The deal will lead to the setting up of a combined driveline systems business in the US.

Under the terms of the agreement, however, the two groups are to exchange several businesses that will allow each to focus on its core automotive driveline operations.

Dana, which merged with US rival Echlin last year in a £2.2bn agreed deal, is to collaborate with GKN to develop modular driveline assemblies containing constant velocity joints for car and light vehicle applications worldwide.

The asset swap will see GKN divest businesses with net assets of about £69m. The companies taken on by GKN had net assets of £65m, of which GKN already owned £24m.

Sarkis Kalyandjian, chief executive of GKN’s automotive driveline division, said the company now has at least 37% of the market for constant velocity driveshafts and propeller shafts.

`Buying the Dana businesses further strengthens our strategy to develop this technology and raises our capacity to provide global support to our customers through local manufacturing capability,’ he said.

GKN shares powered ahead last week from 953p to 999p by the end of the week, boosted partly by the deal, but also by upbeat broker comment.

SG Securities described the stock’s 11% underperformance against the market since first-half figures a month ago as unwarranted and issued a strong buy recommendation.

Copyright: Centaur Communications Limited