By Robert Wall
Rolls-Royce Holdings PLC will focus on growing its civil nuclear
power activities and dispose of other assets after agreeing to sell
the bulk of its energy unit to Siemens AG.
The London-based company may sell residual activities in fuel
cells and smaller power stations that Siemens does not want,
Rolls-Royce's Chief Financial Officer Mark Morris said
Wednesday.
No timeline was given for the transactions.
Two years ago, Rolls-Royce sold a 51% stake in its fuel cell
operation to electronics company LG for $45 million.
Rolls-Royce meanwhile will seek to expand its civil nuclear
power activities, Mr. Morris said.
The agreement struck yesterday to sell it's aircraft
engine-derived civil energy activities to Siemens for GBP785
million ($1.3 billion) has "clear industrial logic," Mr. Morris
said.
The U.K. company will receive another GBP200 million for a
25-year licensing agreement for intellectual property relating to
gas turbines.
The boards of both companies have approved the transaction,
which is expected to close by year's end pending regulator
approvals.
Rolls-Royce last year generated about GBP1 billion in underlying
sales from its energy unit. The gas turbines and compressor systems
activities being sold to Siemens contributed GBP871 million of
revenue and GBP72 million of underlying profit in the period.
The disposal comes after Rishton determined the power-generation
business lacked scale to be globally competitive. The British
company has struggled to lift profitability at the energy unit,
which delivered a 2.5% return on sales in 2013.
Funds from the transaction will aid Rolls-Royce after agreeing
to pay EUR2.43 billion ($3.38 billion) to Daimler AG for the German
car maker's remaining 50% stake in diesel engine maker Tognum AG,
now called Rolls-Royce Power Systems. The transaction should close
in the next five months pending regulatory approval.
Write to Robert Wall at robert.wall@wj.com
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