- Rolls Royce has entered a deal with Bain Capital to sell its Spanish aircraft engine manufacturing business ITP Aero.
- The deal will help the British jet engine maker to hit its GBX 2 billion target for disposal and boost the investor confidence.
- Rolls-Royce is also scheduled to announce a shift from petrol engines to electric powertrains on Wednesday.
Rolls Royce Holding Plc (LON: RR) has entered a deal with a group led by Bain Capital to sell its Spanish aircraft engine manufacturing business, ITP Aero, to repair its battered balance sheet for 1.7 billion Euros (US $2 billion). The deal will help the British jet engine maker to hit its GBX 2-billion target for disposal.
The group led by Bain Capital includes JB Capital and Spanish co-inventors Sapa Group, which is engaged in developing technologies for heavy vehicles in the defence industry. The private equity group led by Bain Capital made promises to the governments of Spain and Basque to maintain a workforce level, industrial capacity, registered office, decision-making centre, technological capacity, tax domicile and Industrial and R&D activity tax domicile.
Rolls Royce Holding Plc’s share in the FTSE 100 group jumped up by 11% to 146.69 by close of London trade on Monday, its highest level since March 2020 and the deal helped it with much-needed cash to recover from the coronavirus crisis, as well as a significant contract win to upgrade engines on US B-52 bomber aircraft for the next 30 years for US $2.6 billion.
The agreement has brought the company close to its target, which will help to boost the investor confidence. The engine maker in recent month sold its various smaller assets such as its Norwegian maritime engine unit Bergen, holding in the business that owns the RAF’s fleet of refueling planes and a civil nuclear instrumentation and control business.
With the sale of ITP Aero and other smaller assets, the company raised around GBX 1.8 billion (US $2.4 billion). The company management said in August 2020 that the ITP sale will bring an end to the disposal program, after the Covid-19 first wave led to travel restrictions globally and the company recorded huge losses.
In August 2021, the company sold its Maritime engines business, Bergen Engine unit to Langley holding for €63 million, 23% holding was sold to air-to-air refueling business AirTanker Holding Ltd for GBX 189 million. Also, in December 2020, it’s sold its separate nuclear business for GBX 70 million.
Rolls Royce Holding Plc in the first half of this year recorded profit. However, it informed that it may not achieve the target to deliver £750 million in free cash flow in 2022 because of uncertain pace of recovery in travel globally.
ITP Aero will remain a supplier of the British Jet engine maker, Roll Royce, which had been approved by its board but is still subject to certain conditions, such as regulatory clearance, but is expected to close in the first half of 2022.
Carlos Alzola will remain as a CEO of ITP Aero and the company will remain based in Zamudio.
Switching to electric
The British luxury car brand is scheduled make an announcement on Wednesday about shifting from petrol engines to electric powertrains and may give clues to about its first electric car, which is supposed to be launched before 2030.
Currently, the company offers its cars with a V12 petrol engine as it stooped manufacturing smaller V8 petrol power plants in 2003.
However, the company has not revealed anything about its electrification plans or the upcoming EVs. Since 2011, the company has been working on electrification of automobiles and developing powertrains. It revealed a one-off electric version of Phantom that featured a 71-kWh battery pack.