Westland in £1.4bn tie-up with Agusta

The world's second biggest helicopter manufacturer was created yesterday after GKN and Finmeccanica of Italy agreed to merge their Westland and Agusta divisions in a £1.4bn deal.

The world's second biggest helicopter manufacturer was created yesterday after GKN and Finmeccanica of Italy agreed to merge their Westland and Agusta divisions in a £1.4bn deal.

The new company, to be called AgustaWestland, will be 50:50 owned by GKN and Finmeccanica. It will have sales of $2.1bn, an order book worth $8bn, 10,000 employees and an in-service fleet of 6,000 aircraft, making it second only to Boeing in the helicopter market.

Among the helicopters produced by the combined business are the EH101, now in service with the Royal Navy, the NH90 tactical transporter, and the Lynx, Apache and Sea King.

Agusta is also developing a tilt rotor aircraft, the BA609, as part of a joint venture with Textron Bell of the US. A hybrid between a helicopter and a fixed wing turboprop aircraft, the BA609 takes off vertically and then flies like a plane and is aimed at the executive jet market.

Westland made profits of £80m last year while Agusta made £47m. To compensate GKN is contributing the more profitable half of the business, it will receive payments of £20m-£30m from Finmeccanica over the next two years. The decision to divide ownership evenly also reflects Westland's strong short-term order book and Agusta's better long-term prospects.

The EH101 was jointly developed by Westland and Agusta and 98 are on order from the UK, Italian and Canadian armed forces. Westland is also prime contractor on a £2bn Ministry of Defence order for Boeing Apache attack helicopters while Agusta has a 30 per cent stake in the NH90, a joint project with the Franco-German manufacturer Eurocopter and Fokker of the Netherlands. France, Italy, Germany and Holland have placed orders for 298 of the helicopters.

Kevin Smith, who heads GKN's aerospace business, will be chairman of AgustaWestland and Amedeo Caporaletti, chief executive of Agusta, will take the same post in the combined company.