Rolls-Royce (LON: RR) will sell the technology firm L’Orange to America’s Woodward (NASDAQ: WWD) in a £610 million deal.
The engine maker is taking steps to “to improve the resilience of the balance sheet” and will use proceeds of the deal to reinvest in the group.
“This transaction builds on the actions we have taken over the last two years to simplify our business,” said Warren East, chief executive of Rolls-Royce.
“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.”
L’Orange is a subsidiary of Rolls-Royce and has 1,000 employees in Germany, the US and China.
After the sale, L’Orange has agreed to a 15 year supply agreement with Rolls-Royce Power Systems, so the groups can remain “important” partners.
“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,” said Russ Mould, an investment director at AJ Bell.
“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 deal is expected to close later this year and has been approved the boards of both companies.
Andreas Schell, president and chief executive of Rolls-Royce Power Systems, said: “Rolls-Royce Power Systems will remain a key customer of Woodward L’Orange.
“We have enjoyed working with L’Orange who have a leading position in their markets, excellent technology, a skilled workforce and strong leadership. We wish them well as they join the Woodward organisation.”
