ROLLS-ROYCE has agreed a deal to offload its Norwegian maritime engine-making arm Bergen to British group Langley Holdings for “an enterprise value of €63 million (£54m)”.
The company said the Langley deal is another step towards its target to make at least £2 billion from asset sales as chief executive Warren East looks to rebuild the group’s balance sheet in the wake of the coronavirus pandemic, which severely affected the firm’s aerospace arm and left it with a £4bn loss .
This led to 9,000 job losses with many at its Derby base but also including more than 500 at its plant at Inchinnan in Renfrewshire.
The statement to the London Stock Exchange comes after an earlier deal with the Russian business TMH Group was vetoed by the Norwegian government in March.
Rolls-Royce announced in February it had signed the agreement to sell the Bergen Engines medium speed gas and diesel engines business to TMH International, the international branch of TMH Group, “for net proceeds of approximately €150m”. It is unclear how the content of the two agreements compares.
The current sale includes the Bergen Engines factory, service workshop and foundry in Norway, as well as engine and power plant design capability and a global service network spanning seven countries.
Rolls-Royce said sale proceeds from the transaction together with €40m of cash currently held within Bergen Engines and which is to be retained by the UK firm “will be used to help rebuild the Rolls-Royce balance sheet in support of our medium-term ambition to return to an investment grade credit profile”.
The firm, which is due to report its half-year figures on Thursday, is hoping to complete the sale at the end of the year.
Rolls-Royce said: “The agreement is subject to the satisfaction of certain closing conditions.
“We have notified the Norwegian government of the agreed sale and effective completion is scheduled for the December 31, 2021.”
READ MORE: Rolls-Royce £4bn loss 'brutal' but flying hours to grow
Mr East said: “We believe that this agreement will provide Bergen Engines and its skilled workforce with a new owner able to take the business on the next step of its journey.
“The sale of Bergen Engines is a part of our ongoing portfolio management to create a simpler, more focused group and contributes towards our target to generate at least £2bn from disposals, as announced last year.”
Bergen employs more than 900 people globally and made around €200m in revenues last year.
Langley, a Nottinghamshire-based industrial conglomerate, employs around 4,600 people with main operations in Germany, Italy, France and Britain, alongside a substantial presence in the US.
It plans to run Bergen as a standalone business.
Chairman and chief executive Anthony Langley, who founded Langley in 1975, said: “The acquisition of Bergen Engines is a strategic step in the development of our power solutions division, and I am looking forward to welcoming the 900-plus employees of Bergen Engines to our family of businesses.”
Langley’s activities range from the production of uninterruptible power systems, packaging machinery and electric motors and generators, to the manufacture of safety-critical mechanical handling equipment, including for the Ministry of Defence’s submarine missile loading facility at Coulport in Scotland.
Jon Erik Røv, managing director at Bergen Engines, said: “Today marks the beginning of a new era for Bergen Engines.”
Mr East has been overhauling Rolls-Royce to strengthen its battered balance sheet, selling off assets and raising more than £5bn from issuing new debt and equity.
He has also embarked on the swingeing cost-cutting programme that meant 9,000 jobs being cut worldwide.
Its half-year results are expected to show further pressure on the bottom line, but will be watched for any signs that the worst of the pandemic impact may have passed.
Rolls-Royce shares closed 1.4p, or 1.35%, up at 104.54p.
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