Acquisition(s)

GKN PLC - Acquisition(s)

PR Newswire

London, July 27

GKN agrees to acquire Fokker Technologies for €706 million

GKN plc (“GKN”) today announces that it has agreed to acquire Fokker Technologies Group B.V. (“Fokker”) from Arle Capital (“Arle”) for an enterprise value of €706 million (£499 million), (the “Transaction”). Fokker is a specialist tier one aerospace supplier in aerostructures, electrical wiring systems, landing gear and associated services, across commercial, military and business jet end markets. Its headquarters are in the Netherlands.

The Transaction is an excellent fit for GKN:

• Reinforces GKN Aerospace’s global leadership position

• Further extends global footprint with presence in China, Turkey, India and Mexico

• Expands technology and product capabilities

• Good reputation for customer service

• Extends OEM relationships

• Operational improvements identified

• Enhances positions on key growth platforms

Nigel Stein, Chief Executive, GKN plc, said:

“Fokker is an excellent strategic and cultural fit which supports our growth strategy. It strengthens GKN Aerospace’s market leadership, manufacturing footprint and technology. This transaction will increase our shipset value on key growth programmes in both the commercial and military markets including Fokker’s complementary positions on the A350 and the F-35. Fokker’s sizable China operations also help boost GKN Aerospace’s activity in this important region. Fokker is a great business with a strong brand and has significant technology heritage. We believe that it will benefit from GKN’s operational focus and long-term approach. I look forward to welcoming the Fokker workforce to GKN.”

There is strong financial rationale for the Transaction:

• Enterprise value of €706 million (£499 million) (1)

• 8.4x Fokker expected 2015 EBITDA (pre synergies)

• Consideration payable to Arle of €500 million (£353 million) in cash

• Expected cost savings of 3% of sales by 2018

• ROIC expected to exceed GKN cost of capital in 2017

• Earnings per share accretive in first full year

• Funded through £200 million equity placing, announced today, and GKN’s existing debt facilities

Fokker Technologies’ markets and technologies

Fokker has four divisions: aerostructures, electrical systems, landing gear and services. Fokker is well positioned on attractive programmes including Airbus (A320/350/380), Lockheed Martin (F-35), Boeing (B737/777), Bombardier (C Series), Gulfstream (G650), United Technologies (GTF engine), Rolls-Royce (Trent 500/1000/XWB engine) and NH Industries (NH90), many of which are sole source and have life of programme contracts.

The positions on F-35 and A350 offer attractive growth prospects with build rates expected to increase significantly in the short to medium term. Fokker has a stable base of orders, with the majority of the value of its orderbook coming from four programmes: F-35, A350, G650 and NH90 European helicopter.

During the year ended 31 December 2014, Fokker reports that it generated 30% of its revenue in military end markets and 20% in business jets. The addition of Fokker to GKN Aerospace will strengthen GKN’s position in both of these.

Fokker is a leader in advanced composites including thermoplastics and GLARE (glass-reinforced aluminium laminates) that will complement GKN’s own composite leadership capability. Fokker also has strong electrical wiring technology, based on proprietary systems, which adds a new technology field to GKN Aerospace.

In addition, Fokker has a 43.57% shareholding in SABCA (Société Anonyme Belge de Constructions Aéronautiques).

Fokker financial profile

For the year ended 31 December 2014, Fokker reported revenue of €758 million, EBITDA of €76 million and operational EBIT of €53 million. As at 31 December 2014, Fokker had total assets of €814 million.

GKN estimates that it can generate operational improvements similar to those achieved in previous acquisitions and has identified potential cost savings and efficiencies equivalent to 3% of sales by 2018. It is expected that the transaction and integration costs will be approximately €50 million (£35 million) during 2015 and 2016. Anticipated revenue growth from 2017 is expected to assist the improvement in the overall Fokker margin, particularly in the higher margin aerostructures division. In addition, Fokker has historical tax losses which GKN expects to utilise going forward.

In 2010, Fokker’s services division voluntarily disclosed sanctions violations to US regulators. A settlement of $21 million was agreed with the Department of Justice (DoJ) and other US regulators in 2014, but litigation regarding the court’s role in the settlement process continues. Both the DoJ and Fokker have appealed the court’s refusal to enter the relevant order. There have not been any further sanction issues since 2010.

Transaction details and timing

GKN intends to part-finance the acquisition from the proceeds of a £200 million equity placing announced today, which represents approximately 4% of GKN’s market capitalisation based on the closing share price on 27 July 2015. The balance will be funded from existing bank facilities. GKN’s pro forma 2015 net debt / EBITDA multiple is expected to be 0.8x or 2.2x including the GKN pension accounting deficit of £1.5 billion at 30 June 2015.

Completion of the Acquisition is expected to take place in the fourth quarter of 2015 following completion of the consultation and information procedures with the Fokker Works Council and trade unions, ITAR and CFIUS regulatory clearances and anti-trust clearance in the EU and the US.

Notes:

(1) The acquisition enterprise value is €706 million (£499 million) comprises €500 million (£353 million) of consideration for the share capital of Fokker, together with assumption of the following liabilities as at 31 December 2014: €135 million (£96 million) of net debt, other debt like items totalling €71 million (£50 million) including provisions in respect of the US Department of Justice settlement, certain pension liabilities and assumption of programme related government advances.

Exchange rate: £1 to €1.4147 used throughout this press release

For further information, on this release please contact:

Guy Stainer

Investor Relations Director, GKN plc

T: +44 (0)207 463 2382

M: +44 (0)7739 778187

E: [email protected]

Chris Fox

Group Communications Director, GKN plc

T: +44 (0)1527 53 3238

M: +44 (0)7920 540051

E: [email protected]

Press releases can also be found on the website www.gkn.com

Financial Advisors

Bank of America Merrill Lynch

Ian Ferguson

Chris Squire

T: +44 (0)20 7628 1000

Gleacher Shacklock LLP

Tim Shacklock

Mark Hammond

T: +44 (0)20 7484 1120

Editor’s notes:

GKN plc is a global engineering group. It has four divisions; GKN Aerospace, GKN Driveline, GKN Powder Metallurgy and GKN Land Systems, which operate in the aerospace, automotive and land systems markets. Over 50,000 people work in GKN companies and joint ventures in more than 30 countries. GKN is listed on the London Stock Exchange (LSE: GKN) and recorded sales of £7.5 billion in the year to 31 December 2014.

GKN Aerospace is a global first tier supplier of airframe structures, engine components, transparencies and fuel/flotation systems, with sales of £2.2 billion in 2014 and a global workforce of over 12,000 employees. It has a significant participation on all major aircraft programmes today and a broad customer base spanning commercial, military, business aerospace and space markets. The company’s extensive engineering capability and clear focus on targeted innovation has created technological and manufacturing leads in each of its areas of expertise.

Fokker Technologies B.V. is a leading global aerospace specialist that develops and manufactures highly engineered advanced aircraft systems and components for aircraft manufacturers and provides integrated maintenance services and products for aircraft owners and operators. The company was founded in 1919. Headquartered in Papendrecht, the Netherlands, Fokker operates facilities in the Netherlands, Romania, Turkey, Canada, Mexico, USA, China, India and Singapore, and employs approximately 4,900 people. For the year ended 31 December 2014, reported revenue was €758 million.

• Fokker Aerostructures is a specialist in the design, development, and manufacturing of lightweight aerostructures and modules. In the year ended 31 December 2014, Fokker Aerostructures reported revenue of €370 million (before intragroup eliminations) and operational EBIT of €36 million.

• Fokker Electrical Systems is a specialist in electrical wiring interconnection systems for aircraft and aircraft engines. In the year ended 31 December 2014, Fokker Electrical reported revenue of €162 million (before intragroup eliminations) and operational EBIT of €16 million.

• Fokker Landing Gear is a specialist in the design, development and manufacture of landing gear for small to mid size aircraft and helicopters. In the year ended 31 December 2014, Fokker Landing Gear reported revenue of €52 million (before intragroup eliminations) and operational EBIT of €4 million.

• Fokker Services is an integrated services organisation that partners with manufacturers, owners and operators of aircraft offering redelivery and availability services. In the year ended 31 December 2014, Fokker Services reported revenue of €201 million (before intragroup eliminations) and operational EBIT of €9 million.

There will be an analyst and investor meeting today at 08.30am at the Grand Hall, JP Morgan, 60 Victoria Embankment, London, EC4Y 0JP.

A live videocast of the presentation will be available at http://www.gkn.com/investorrelations/Pages/Webcasts.aspx.

Slides will be put onto the GKN website approximately 45 minutes before the presentation is due to begin, and will be available to download from the GKN website at: http://www.gkn.com/investorrelations/Pages/results-and-presentations.aspx?year=2015.

Questions will only be taken at the event.

A live dial in facility will be available by telephoning: +44 (0) 1452 557 851, Conf ID: 85540574

Following the event, the webcast will be made available on the company website www.gkn.com and a replay of the conference call will be available until 28 August 2015 on:

Standard International Number: +44 (0) 1452 550 000

Replay Access Number: 85540574

This announcement together with the attached financial information thereto may be downloaded from: www.gkn.com/media/Pages/default.aspx.

Disclaimer:

This Announcement contains certain "forward-looking statements" with respect to certain of GKN’s plans and its current goals or expectations relating to its future financial condition and performance and which involve a number of risks and uncertainties. Forward looking statements are typically identified by the use of forward looking terminology such as 'aims', 'believes', 'expects', 'may', 'will', 'could', 'should', 'intends', 'estimates', 'plans', 'assumes' or 'anticipates' or the negative thereof or other words of similar meaning. Examples of such forward-looking statements include, among others, statements regarding GKN’s business strategies, future plans, present or future events, or objectives for future operations that involve risks and uncertainties and are not historic fact. Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond GKN’s control and all of which are based on GKN’s current beliefs and expectations about future events. Such statements are based on current expectations and, by their nature, are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance, expressed or implied, by the forward-looking statement. No assurance can be given that such forward-looking results will be achieved. Factors that might cause forward-looking statements to differ materially from actual results include, among other things, the following: global economic conditions, economic conditions in the jurisdictions in which GKN and Fokker operate, the effects of continued volatility in credit markets, exchange rate fluctuations and legislative, fiscal and regulatory developments. The forward-looking statements contained in this Announcement speak only as of the date of this Announcement and GKN assumes no obligation to, and does not intend to update or revise publicly any of them whether as a result of new information, future events or otherwise, except to the extent required by the Financial Conduct Authority, the London Stock Exchange, the Prospectus Rules, the Listing Rules and the Disclosure and Transparency Rules or any other applicable law or regulation.

J.P. Morgan Securities plc and UBS Limited, each of which is authorised by the Prudential Regulation Authority ("PRA") and regulated in the United Kingdom by the Financial Conduct Authority and PRA, are acting for the Company and for no-one else in connection with the placing of ordinary shares in the Company ("Placing") and will not be responsible to any person other than the Company for providing protections afforded to their clients or for providing advice to any other person in relation to the Placing or any other matter referred to in this presentation (including the Appendix).

Merrill Lynch International (“Bank of America Merrill Lynch”), a subsidiary of Bank of America Corporation, is acting exclusively for GKN in connection with Transaction and for no one else and will not be responsible to anyone other than GKN for providing the protections afforded to its clients or for providing advice in relation to Transaction.

Nothing in this Announcement is intended to be a profit estimate for any period or a forecast of future profits and statements relating to earnings accretion should not be interpreted to mean that the earnings per GKN share for the current of future financial period will necessarily match or exceed its historical published earnings per share.

The distribution of this Announcement in certain jurisdictions may be restricted by law and persons into whose possession this Announcement comes should inform themselves about, and observe, any such restrictions.

This Announcement does not constitute an offer of, solicitation of any offer of, or invitation to subscribe for, any securities of GKN.