Rolls-Royce confirms unit sale to Siemens

<p>Siemens is buying the Rolls-Royce energy gas turbine and compressor business.</p>

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.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.