OREANDA-NEWS. Rolls-Royce announced today that it has signed an agreement to sell L’Orange, a wholly owned subsidiary of Rolls-Royce Power Systems, to Woodward Inc., for an enterprise value of €700 million.

Woodward (headquartered in Fort Collins, Colorado, US) is an independent designer, manufacturer and service provider of control system solutions and components for the aerospace and industrial markets. L’Orange will be renamed Woodward L’Orange and will be integrated into Woodward’s Industrial segment.

L’Orange supplies fuel injection technology for engines that power a wide range of industrial applications including marine power and propulsion systems, special-application vehicles, oil and gas processing, and power generation. L’Orange serves some of the world’s best known specialist diesel engine manufacturers, including Rolls-Royce Power Systems’ leading subsidiaries, MTU Friedrichshafen and Bergen Engines, and other low to high speed engine builders. L’Orange will remain an important partner and supplier for Rolls-Royce Power Systems in the future through a long-term supply agreement, with an initial term of 15 years.

L’Orange is based in Stuttgart, Germany and has approximately 1,000 employees based mostly in Germany, but also in the US and China. In 2017, L’Orange reported pro forma sales of €244 million, pro forma underlying EBITDA of €74 million, pro forma underlying operating profit of €64 million and pro forma post-tax free cash flow of €51 million. All of these figures were consolidated within the results of the Rolls-Royce Power Systems business.

Rolls-Royce CEO Warren East said: “This transaction builds on the actions we have taken over the last two years to simplify our business. The divestiture of L’Orange enables Rolls-Royce Power Systems to focus on other long-term, high growth opportunities and our company to allocate our capital to core technologies and businesses that drive greater returns for the Group.”

Andreas Schell, President and CEO Rolls-Royce Power Systems, added: “Rolls-Royce Power Systems will remain a key customer of Woodward L’Orange. We have enjoyed working with L’Orange who have a leading position in their markets, excellent technology, a skilled workforce and strong leadership. We wish them well as they join the Woodward organisation.”

The transaction has been approved by the boards of directors of both Rolls-Royce and Woodward, as well as the Rolls-Royce Power Systems Supervisory Board. The transaction is expected to close by the end of the second quarter of calendar 2018, subject to clearance from the German antitrust authorities.

The proceeds will be used to improve the resilience of the balance sheet and provide additional capital to judiciously pursue opportunities that will drive greater returns for the Group. Full year 2018 guidance for revenue, profit and free cash flow provided by Rolls-Royce on 7 March 2018 included L’Orange.

The sale has no impact on the remainder of the Rolls-Royce Power Systems business.