Rolls-Royce sells L'Orange to Woodward for 拢610m as it 'simplifies' business
The UK-based engine maker first considered the sell-off of its subsidiary in January as part of its restructuring effort.
Monday 9 April 2018 17:22, UK
UK-based engine maker Rolls-Royce is selling off its German subsidiary L'Orange for 鈧�700m (拢610m) to US group Woodward.聽
Rolls-Royce shares were up at 2% on the news, up 1.25% by closing.
Stuttgart-based L'Orange, which supplies fuel injection technology for engines, employs 1,000 people, mostly in Germany.
The sell-off, first proposed in January as part of Rolls-Royce's ongoing restructuring, is the biggest under chief executive Warren East, the firm's boss since July 2015.
"This transaction builds on the actions we have taken over the last two years to simplify our business," Mr East said.
"The divestiture of L'Orange enables Rolls-Royce Power Systems to focus on other long-term, high growth opportunities and our company to allocate our capital to core technologies and businesses that drive greater returns for the group."
The sale comes amid Rolls-Royce's plans to cut costs "significantly" as the company recovers from its biggest ever loss of £4.6bn in 2016, with a pre-tax profit of £4.9bn in 2017.
On an underlying basis, Rolls saw annual pre-tax profits rise 25% to £1.1bn in 2017.
"As well as providing a healthy boost to the balance sheet, it suggests chief executive Warren East is not sitting on his hands despite reporting good progress on a transformation of the business at last month's full year results," said AJ Bell's investment director Russ Mould.
"East has now been in charge at Rolls for more than two years having previously earned a stellar reputation at British technology champion ARM. His successful rehabilitation of a fallen corporate titan is only bolstering that reputation."
The firm's buyer, Colorado-based Woodward, designs and manufactures control systems and components for aerospace and industrial markets.
It will be renamed Woodward L'Orange and will continue to supply Rolls-Royce Power Systems under a 15-year supply deal subject to renewal.
The sale is expected to complete by June, subject to German regulatory approval.
Rolls-Royce, which makes engines used in Airbus and Boeing aircraft, also makes power systems for use on land and at sea.