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Rolls Royce confirms unit sale to Siemens

Article By: ,  Financial Analyst
May 7, 2014 1:15 PM

Rolls-Royce has confirmed it is selling its energy gas turbine and compressor business to Siemens in a deal worth hundreds of millions of pounds.

The firm revealed the sale of the unit has been agreed at £785 million. In 2013, this part of the business recorded a profit of £72 million for Rolls-Royce on sales of £871 million.

John Rishton, Rolls-Royce's chief executive, said: "This agreement will give the energy business greater opportunities as part of a much larger energy company and allows Rolls-Royce to concentrate on the areas of business where we can add most value."

Oil and gas companies are among the customers of the unit, as well as firms in the electricity generation sector. While Rolls-Royce has a lot of name recognition in this field, Siemens does a lot more business in the sector and its own energy business has 83,500 staff already. It generated sales of 27 billion euros (£22.15 billion) in 2013.

In contrast, the Rolls-Royce energy gas turbine and compressor business only employs around 2,400 members of staff. It is not yet clear whether or not the sale of the unit to Siemens is going to have any impact on jobs at the firm.

Siemens is also becoming a possible rival to US conglomerate General Electric in an expected bid for French group Alstom's power business.

Mixed responses

Investors responded positively to the news of the deal, with the share price of Siemens up in the early stages of trading this morning. By 09:15 BST, stocks in the company were up by more than 2.5 per cent on the start of the session and shares were continuing to rise in value.

However, the picture was less clear for Rolls-Royce investors despite the large amount of money the company is set to make from the sale of its energy gas turbine and compressor business to Siemens. At 09:16 BST on the London Stock Exchange, shares in the prestigious company were down by 0.77 per cent compared to the start of the trading session.

At 11:31 BST, Rolls-Royce stocks were down 1.44 per cent and Siemens stocks were up 1.38 per cent at 11:32 BST.

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