In its latest reshaping, British giant Rolls-Royce has announced it is to sell its loss-making marine unit for £500m to Norwegian company Kongsberg.
The deal follows Rolls-Royce’s strategic January 2018 review of its commercial marine operations, with the aim to simplify the business.
Rolls-Royce Commercial Marine was reportedly operated at a loss of £70m in 2017, and this sale will likely make Norway’s Kongsberg – which supplies technology used in maritime, oil and gas, fisheries and aerospace industries – further lead in both Nordic and international maritime markets.
The deal will reportedly see Kongsberg gain Rolls-Royce’s propulsion, deck machinery, automation and control equipment, a service network and ship design capabilities.
Warren East, chief executive of Rolls-Royce, commented: “This transaction builds on the actions we have taken over the last two years to simplify our business.
“The sale of our Commercial Marine business will enable us to focus on our three core businesses [civil aerospace, defence and power systems] and on meeting the vital power needs of our customers.”
This latest deal follows Rolls-Royce’s recent announcement that it is to cut more than 3,000 UK jobs, with middle managers and office staff in its Derby base thought to be hit hardest.
- Represented in more than 25 countries
- Approximately 7,000 employees
- Annual turnover in 2017 £1.4bn (14.5bn NOK)
Rolls-Royce Commercial Marine
- Represented in 34 countries
- Approximately 3,600 employees
- Annual turnover in 2017 £0.9bn (8.9bn NOK)
For Kongsberg, which last year provided sales of £1.4bn, the deal will raise its marine presence in supplying products to both commercial and merchant vessels.
Geir Håøy, CEO and president of Kongsberg, said: “The acquisition of Rolls-Royce Commercial Marine makes us a more complete supplier to the maritime industry.
“The maritime industry is becoming increasingly globalised and is undergoing considerable technological and market driven changes. With this acquisition we will strengthening our strategic position with shipowners, shipyards and other customers and partners”.
Kongsberg will partially finance the transaction with a £480m (5bn NOK) rights offering. The Norwegian government, which owns 50% of the company, has said it will participate in the offering, assuming it has parliamentary backing. Kongsberg is also planning to issue a new bond loan.
Rolls-Royce Commercial Marine has experienced challenging market conditions within the offshore sector and this could be the reason for its lack of profits.
The majority of Rolls-Royce Commercial Marine workforce are based in the Nordic region and the sale is expected to make the company a £50m profit.
Together, the companies have equipment and deliveries affiliated to 30,000 vessels globally; this move will strengthen Kongsberg as leading in the Norwegian maritime cluster, with the company set up now to have a more notable Nordic and international position in the sector.
British giant Rolls-Royce by numbers and news:
- Employs 55,000 people in 50 countries, nearly 20,000 of these are engineers
- 313 graduates and 339 apprentices were recruited through global training programmes last year
- Annual underlying revenue was £15bn (2017), around half of which came from the provision of aftermarket services