GKN pays pounds 335m for US metal components firm

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Andrew Feinberg

White House Correspondent

GKN TOOK a major step forward in its American expansion strategy yesterday by paying pounds 335m to acquire a US powder metallurgy, aerospace components and industrial services business.

The acquisition of Interlake Corporation will also transform GKN into the world's leading vertically-integrated supplier of powdered metal components, which are taking over from castings and forgings in the car and aerospace industries because of their lightness and strength.

The acquisition will mean that GKN has increased its sales in powder metallurgy seven-fold to $811m since 1996 and doubled its turnover in the aerospace components sector.

GKN is paying pounds 158m for Interlake's equity and assuming debt of pounds 177m. It will also incur a goodwill charge of pounds 476m which will be amortised over 20 years.

Interlake employs 2,500 people and made profits of pounds 27m on sales of pounds 293m last year. Of its three divisions, the most important is the Hoeganaes Corporation, which has sales of $200m and supplies 50 per cent of the US market for powdered metals.

GKN is already a big customer of Hoeganaes, accounting for about 15 per cent of its sales. About 60 per cent of its turnover comes from the automotive industry and the rest from sectors such as pharmaceuticals and photocopying.

C K Chow, chief executive of GKN, said it did not anticipate any regulatory or competition difficulties. He also said Hoeganeas would be run as an arms' length business, to reassure its other customers that they would not be at a disadvantage to GKN.

Interlake's Chem-Tronics division has sales of $200m and makes lightweight components for the aerospace industry, mainly engine manufacturers such as Rolls-Royce, General Electric and Pratt & Whitney.

The third leg of the business, industrial services, is a complementary fit for GKN's Chep pallet division and makes racking for pallets and conveyors.