Deputy City Editor
GKN is selling its axles division to Dana Corporation of the US in a reshuffle of the two companies' stakes in several joint ventures. The deals are part of a move by GKN to concentrate on its core drivelines business. Drivelines, which transfer a vehicle's power from the engine to the wheels, are the predominant product in GKN's largest division.
The disposal will raise pounds 44m for GKN and a further pounds 15m of debt will be transferred to Dana. The final strike price will be adjusted to reflect the audited net worth of the division at completion and GKN is expected to book an pounds 8m exceptional credit in its 1995 figures. GKN's axles division consists of two plants in the UK, for light axles in Birmingham and heavy axles in Leeds, together with a tractor axle plant in Como, northern Italy. Dava acquires a staff of 1,400 in the UK and 200 in Italy. In the year to December 1994, the division made profits before tax of pounds 6m from sales of pounds 116m. Tangible assets at that date were pounds 18m.
As part of the focus on its core business, GKN also announced agreements to increase its interest in two driveline joint ventures in Brazil and Argentina and to set up a new venture in Colombia at a total cost of pounds 19m. GKN already operates in 35 countries around the world.
In Brazil, GKN's 40 per cent holding in its venture will be increased to 49 per cent with the acquisition of shares from a Dana subsidiary. A similar deal with Dana sees GKN's holding in Danargen of Argentina increase to 49 per cent. In Colombia, a 49 per cent share in a Dana subsidiary is to be transferred to GKN.
Trevor Bonner, managing director of GKN's automotive and agritechnical products division, said: "Axles was a niche business for GKN and its future should be much more secure with Dana for whom axles is a major core business activity.
"We are delighted to become involved in Colombia for the first time."
GKN's shares closed 1p lower at 806p.