5 July 2012 Last updated at 12:18 ET

GKN agrees to buy Volvo's aero engines division

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GKN

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Engineering group GKN has agreed to buy the aero engine business of Swedish truck-maker Volvo for £633m ($986m).

GKN's chief executive, Nigel Stein, said the deal was, "a highly attractive acquisition... creating a market leader in aero engine components".

The deal will give GKN more exposure to the civil aircraft sector, offsetting falling defence sales as governments cut back on defence spending.

Shares in GKN rose 13% on news of the deal.

The British engineering group said the payment broke down into £513m for the business, plus a pension settlement of £50m and refinancing of £70m.

GKN has plants in Bristol and Cowes, Isle of Wight.

GKN's aerospace business is the firm's second biggest division. It makes parts for civilian and combat aircraft as well as helicopters.

Last year it had sales of £1.5bn.