London-based global engineering major GKN Plc has agreed to buy Volvo's aerospace division for Swedosh krona (SEK) 6.9 billion (£633 million).
''GKN is a strong new owner for Volvo Aero,'' said Volvo's CEO Olof Persson adding that GKN will provide Volvo Aero with the best possible conditions for continued advancement in its industry.
GKN's chief executive, Nigel Stein, said the deal was, ''a highly attractive acquisition... creating a market leader in aero engine components''.
According to experts, the deal will give GKN more exposure to the civil aircraft sector, offsetting falling sales as governments cut back on defence spending. Volvo Aero had sales of £616 million last year.
After the divestment, Volvo, the world's number two truckmaker, is expected to focus on increasing its capacity of heavy commercial vehicles and expand the range of its engine component portfolio to meet booming demand. In 1999, Volvo moved away from manufacturing cars when it sold Volvo Cars to Ford Motors for $6.45 billion.
Volvo started looking for a buyer for the aero unit last November. In March, there were reports that GKN was moving closer to clinch the deal after suitors, Germany's MTU Aero Engines and private equity firms Carlyle Group and Nordic Capital, dropped out of the race (UK's GKN emerges frontrunner for Volvo's $1.3-bn aircraft business).