Rolls-Royce is to sell L’Orange, the fuel injection technology subsidiary of Rolls-Royce Power Systems, to Colorado-based Woodward Inc for €700m.
Rolls-Royce CEO Warren East said the sale will help Rolls-Royce Power Systems to ‘focus on other long-term, high growth opportunities’.
Headquartered in Fort Collins, Woodward designs and manufacturers control system solutions and components for the aerospace and industrial markets.
L’Orange has approximately 1,000 employees and supplies fuel injection technology for marine power and propulsion systems, special-application vehicles, oil and gas processing, and power generation.
The company’s technology can be found in engines produced by Rolls-Royce Power Systems’ subsidiaries, MTU Friedrichshafen and Bergen Engines, and other low-to-high speed engine builders. Stuttgart-based L’Orange will continue to supply Rolls-Royce Power Systems through a long-term supply agreement, with an initial term of 15 years.
In 2017, L’Orange reported pro forma sales of €244m, pro forma underlying EBITDA of €74m, pro forma underlying operating profit of €64m and pro forma post-tax free cash flow of €51m.
“This transaction builds on the actions we have taken over the last two years to simplify our business,” East said in a statement. “The divestiture of L’Orange enables… our company to allocate our capital to core technologies and businesses that drive greater returns for the Group.”
The transaction has been approved by the boards of directors of Rolls-Royce and Woodward, as well as the Rolls-Royce Power Systems Supervisory Board. The transaction is expected to close by the end of June 2018, pending clearance from German antitrust authorities.
Commenting on the deal, Paul Adams, head of aerospace at management consultancy, Vendigital said: “Big changes are underway at Rolls-Royce, which have already started to transform its performance. The business announced annualised profits before tax of £4.9bn last month, up from a loss of £4.6bn last year.
“More can be achieved if Rolls-Royce continues with its five-to-three plan to simplify its business model by reducing its operating divisions. Today’s announcement follows an announcement at the start of the year about plans to sell its commercial marine business. These divestments will enable the business to focus on core activities and areas of the business that deliver the strongest returns.
“The sale of L’Orange was widely expected following the announcement that its operations were under review. By committing to remain a key customer, Rolls-Royce Power Systems is reassuring the marketplace that it will continue to work closely with L’Orange to deliver existing contracts.”