Rolls-Royce to boost balance sheet with £610m sale of technology business L’Orange

The engineering group's chief exec said the deal was part of a wider strategy of simplifying the business

Caitlin Morrison
Monday 09 April 2018 09:31
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Rolls-Royce manufactures engines for planes
Rolls-Royce manufactures engines for planes

Rolls-Royce has agreed to sell technology firm L’Orange to US aerospace group Woodward for €700m (£610m).

The group said the proceeds of the sale will be re-invested into the company “to improve the resilience of the balance sheet”.

L’Orange is a Stuttgart-based subsidiary of Rolls-Royce’s power systems business with 1,000 employees based in Germany, the US and China.

The firm, which supplies fuel injection technology for specialist engines, has agreed a long-term supply agreement to remain an “important” partner of Rolls-Royce Power Systems, for an initial period of 15 years.

Warren East, chief executive of Rolls-Royce, said the deal was another step in the group’s plan to simplify the business.

Selling L’Orange, Mr East said, will allow 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”.

Russ Mould, investment director at AJ Bell, said: “As well as providing a healthy boost to the balance sheet, (the sale) 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.

“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 sale of L’Orange has been approved by the boards of both Rolls-Royce and Woodward, and the Rolls-Royce Power Systems supervisory board. The deal is expected to close by the end of the second quarter of this year, subject to approval by German competition regulators.

Shares in Rolls-Royce edged up in early trading on Monday. 

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