Monday, 11 June 2012

Rolls-Royce Update: AEC Joint venture.

Rolls-Royce @ 825.50p, +7 (+0.86%).

I see that Rolls-Royce is taking full ownership of its Aero Engine Controls joint venture:

"Engine control systems play an increasingly important part in enhancing the fuel efficiency and overall performance of modern jet engines," Rolls-Royce said on Friday.

"This acquisition will give Rolls-Royce full ownership of a critical capability that confers competitive advantage." ( UPDATE 1-Rolls-Royce buys out controls JV partner Goodrich)

I also notice that the joint venture's partner is Goodrich which itself is in the course of being taken over by United Technologies (Pratt & Whitney owner), which has recently bought out Rolls-Royce's 32.5% stake in the International Aero Engines venture and entered into a new joint venture with Rolls-Royce to produce engines for the 120 - 230 seat aircraft market.

Almost a virtuous circle.

"The British company said it would pay half of the net asset value of AEC once the takeover had completed.

The joint venture, which was designed to break even, had gross assets of 116 million pounds ($180.7 million) at the end of 2011 and net assets of 8 million pounds, along with debt of about 54 million pounds, Rolls-Royce said in a statement. " ( UPDATE 1-Rolls-Royce buys out controls JV partner Goodrich)

My initial thoughts on first seeing the news, was that it might contribute to UTX's fund raising to finance the Goodrich purchase but it barely registers given the scale of the Goodrich acquisition at $16.5bn. ( UTC to sell assets to fund Goodrich buy)

Instead it seems more like a sweetener whilst tidying up a little core/non-core business (make/buy).

Related articles:
- UPDATE 1-Rolls-Royce buys out controls JV partner Goodrich
- Rolls-Royce to acquire Aero Engine Controls
- UTC to sell assets to fund Goodrich buy

Related posts:
- Rolls-Royce update: IAE stake sale and new joint venture.

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