GKN to bolster Land Systems division with Stromag acquisition |
GKN (LON:GKN), the engineering group, said this morning that it had signed an agreement with the shareholders of Germany’s Stromag Holding GmbH to acquire the business. The move will bolster GKN’s Land Systems division which was set up last summer to service customers in the off-highway market and pursue growth opportunities in high speed rail, renewable energy and defence.
Stromag is a market leading engineer of industrial power management components. Its main products include hydraulic clutches, electro-magnetic brakes and flexible couplings serving end-markets including agricultural equipment, construction and mining machinery, renewable energy and the metal processing industry. The business is based in Unna, Germany and has operations in Germany, France, US, Brazil, India and China.
GKN is paying €164 million (£146 million) in cash from existing resources for the equity and repayment of debt of €31 million (£28 million). Stromag is being acquired from shareholders including private equity firm Equita and a large number of other organisations and individuals, including management.
In the year to December 31, 2010, Stromag reported sales of €111 million (£99 million), EBITDA of €19 million (£17 million), profit before tax of €10 million (£9 million) and gross assets were €103 million (£92 million). In 2011, sales are expected to be around €140 million (£125 million) and the acquisition price equates to a multiple of 7.5 to 8.0 times expected 2011 EBITDA.
Andy Reynolds Smith, an executive director at GKN, said: “The acquisition of Stromag is an important step in the implementation of the GKN Land Systems’ strategy to build a global leader in Industrial Power Management, extending our capability in electro mechanical components. In combination with our existing business, it will provide a strong platform to accelerate growth in existing markets, together with access to a number of attractive new industrial segments including renewable energy.”
GKN formed Land Systems in June 2010 by bringing together the operations of GKN OffHighway, GKN AutoStructures and GKN Industrial and Distribution Services. It said it wanted to use the platform to develop “a fourth global leader” alongside its existing Driveline, Powder Metallurgy and Aerospace divisions. In April, GKN reported that first quarter sales at Land Systems were up 27% at £220 million, with a trading profit of £18 million, up from £6 million, and a substantial improvement in the trading margin to 8.2%. GKN said the division’s markets had continued to improve, with solid demand for mining and construction equipment and the European agricultural equipment market recovering strongly.
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