Rolls-Royce sells Spanish unit for €1.7bn as it repairs finances | Rolls-Royce

Rolls-Royce has bought its Spanish business for €1.7bn and gained a multibillion-dollar contract from the US air pressure, prompting a FTSE 100 main share value surge as traders cheered indicators of the jet engine maker’s post-pandemic recovery.

Shares in Rolls-Royce soared by greater than 10% on Monday, sending the company’s stock to its highest degree for the reason that early weeks of the Covid disaster in March 2020 after the company introduced the sale of its Spanish ITP Aero unit to a consortium led by the US non-public fairness agency Bain Capital.

The company stated the sale, which will probably be accomplished within the first half of subsequent year, marks a key step in fulfilling its promise to traders to strengthen its finances by making £2bn of disposals this year.

The company additionally introduced a contract to produce F130 engines for the US air pressure’s B-52 Stratofortress for the following 30 years. The contract may very well be price as a lot as $2.6bn (£1.9bn) to Rolls-Royce. The contract will initially lead to Rolls-Royce powering the jets for a six-year interval price $500m.

With air journey severely curtailed in the course of the pandemic, Rolls-Royce’s finances had been hit onerous as a result of the company is paid on the premise of the variety of hours flown by plane that use its engines.

“Today’s announcement is a significant milestone for our disposal programme as we work to strengthen our balance sheet, in support of our medium-term ambition to return to an investment grade credit profile,” stated Warren East, the chief government of Rolls-Royce. “The creation of an independent ITP Aero is a great opportunity for the company, its people and other stakeholders. It will remain a key strategic supplier and partner for decades to come.”

The sale and contract cap a strong month for Rolls-Royce, whose share price has rise along with other aviation stocks after the UK government simplified international travel rules and scrapped Covid PCR tests for fully vaccinated travellers.

The company’s shares rose 10.5%, making Rolls-Royce the top riser on the FTSE 100 on Monday afternoon.

“The lift-off of Rolls-Royce shares following the relaxation of transatlantic travel rules was given added thrust today with news of a big contract with the US air force,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown. “Rolls-Royce engines will power the USAF B-52s for the next 30 years, and the clinching of this deal, which could be worth up to $2.6bn, is yet another ray of sunlight for the engineering firm, which finally seems to be leaving the pandemic storm clouds behind.”

ITP Aero, a maker of turbine blades based in the Basque region of Spain, reported revenues of €735m and profits of €40m last year. The business was the biggest asset Rolls-Royce identified for sale in a recovery plan announced last August. Smaller assets that have been offloaded include a stake in Air Tanker Holdings, its Bergen Engines unit in Norway, and a civil nuclear instrumentation and control business.

“Today’s announcement effectively marks the end of the disposal programme,” a spokesman for Rolls-Royce said. “We continually evaluate non-core assets in the portfolio and will always focus on maximising shareholder value.”

The Bain-led consortium also includes Sapa and JB Capital.

“All of us at ITP Aero are eager to start the next chapter of our story as an independent company and a strong strategic plan and financial support behind us,” stated Carlos Alzola, the chief government of ITP Aero.

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