U.K.-based GKN Aerospace has agreed to buy engine specialist Volvo Aero for $987 million, ending months of speculation over the future of the Swedish aerospace company.

Among others, MTU Aero Engines and the Carlyle Group — an investment company — are understood to have been interested in Volvo Aero, but pulled out of the bidding. Volvo Aero is currently part of the broader Volvo Group.

“This is a highly attractive acquisition for GKN, creating a market leader in aero engine components,” says GKN CEO Nigel Stein. “With excellent technology and strong life-of-program positions on most civil aero engines, Volvo Aero will significantly enhance GKN Aerospace’s engine component business.” The acquisition is scheduled to be completed during the third quarter, although it is still subject to regulatory approvals.

GKN says it expects Volvo Aero’s operating margin to reach an 11-13% target in 2013. That will be made possible by operational improvements and cost savings equivalent to 3-4% of its sales. GKN Aerospace’s pro forma sales for 2011 increased to more than ₤2 billion ($3.1 billion), up from ₤1.48 billion in the previous year.

GKN has been pursuing Volvo Aero as part of an aggressive growth strategy that includes adding engine parts to “a broader range of product families.” The Swedish engine company, which provides parts for a wide range of commercial, military and space products, was put up for sale by Volvo in November 2011.

With the Volvo Aero acquisition, GKN’s center of gravity is shifting more toward aerospace. Around 37% of its revenues will be derived from that segment after the acquisition. “GKN Aerospace will now be a leader in the aero engine sector, complementing its leading position in composite aero structures,” Stein says.

The Volvo Group is disposing of the aero-engine unit to focus on heavy trucks and construction equipment. Volvo Aero specializes in supplying compressor rotors, turbine structures and fan cases to General Electric, CFM, Rolls-Royce and Pratt & Whitney. It also makes the RM12 engine for the Saab JAS39 Gripen fighter.

The change in ownership comes as Volvo Aero confirms delivery of the first components for Pratt’s PW1100G geared turbofan, which is destined to power the Airbus A320NEO. The company says the parts “will be installed in the first engine to be tested this autumn.”

Volvo Aero is now moving on to assemble the next set of components for the first PW1100G that will undergo testing later this year. The company is responsible for the design and manufacture of the PW1100G turbine exhaust case and intermediate case under an agreement announced with Pratt a year ago.