British engineering giant GKN has confirmed its plans to buy Volvo's aero engine division.
The deal, said to be worth £638 million, was welcomed by the government and trade unions.
Business secretary Vince Cable said the deal will strengthen UK's aerospace industry, making it the biggest in Europe. He said: “This is good news for the UK aerospace sector and I welcome the fact that a UK company has the confidence to pursue a takeover of this scale. This builds on the already impressive range of capabilities that GKN has.
“Our aerospace sector, which employs 100,000 people, is world class and through deals such as this continues to bolster its position as Europe's largest.
“It's particularly welcome coming just a few days ahead of the Farnborough International Airshow, where the world will come to the UK to see the strengths we have as a nation in this industry.”
Ian Waddell, Unite's national officer said: “This is good news for GKN and good news for the UK. The company has set itself a target to be the world's best engineering company. This bold acquisition demonstrates that ambition and is proof that UK aerospace is a world leader.
“Aerospace is a huge success story for the UK, generating billions of pounds of export revenues every year and employing hundreds of thousands of highly skilled people. It is an industry we should be proud of in this country.”
The official transaction is scheduled for completion during the third quarter of 2012.
Volvo Aero is the subsidiary of Volvo, the Swedish truck-maker. The business designs, engineers and manufactures components and sub-assemblies for aircraft engine turbines. Over 3,000 workers based in Sweden, Norway and the USA are employed at the company.
GKN has operations in more than 30 countries, employing 45,000 people in subsidiaries and joint ventures. In UK the company's aerospace operations are based in Luton, Bristol, Yeovil, Cowes and Portsmouth.