Rolls-Royce to buy out JV partner in Birmingham-based AEC
ROLLS-ROYCE has announced it is to buy out its joint venture partner – Goodrich Corporation – in Birmingham-based Aero Engine Controls.
The deal – for an undisclosed sum – will see the aero engine manufacturer acquire the 50% of shares it does not already own in the business.
The move had been expected due to the impending acquisition of Goodrich by US-based United Technologies Corp.
AEC was established in January 2009 to combine the engine controls businesses of the two companies. Planning permission for a new £60m advanced manufacturing and technology facility at Birmingham Business Park was approved last month.
The joint venture principally designs and manufactures engine control systems including electronic engine controllers, fuel pumps and fuel metering units for a wide range of Rolls-Royce engines and for a number of other programmes.
It has awarded contracts worth around £14m with West Midlands-based component suppliers.
Engine control systems play an increasingly important part in enhancing the fuel efficiency and overall performance of modern jet engines. Rolls-Royce said the acquisition would give it full ownership of a critical capability that confers competitive advantage.
AEC employs around 1,400 people – 1,100 of which are due to work in the new Birmingham facility once it is completed in 2014. It is currently operating from a base in Hall Green and in addition to this, it has operations in Derby, Belfast and Indianapolis.
In a statement, Rolls-Royce said: “The transaction has been agreed with United Technologies Corp (UTC), which is in the process of acquiring Goodrich. The acquisition of the remainder of the shares in AEC by Rolls-Royce will only proceed once the acquisition of Goodrich by UTC is complete and once any necessary antitrust approvals are obtained.
“The transaction will have no material impact for Rolls-Royce on the current year’s financial performance.”
Aero Engine Controls was designed as a break-even business and its pre-tax profit at December 31, 2011 was £0.2m.
Rolls-Royce said the cost of the acquisition would be a cash amount determined by 50% of the audited net asset value of AEC once the acquisition of Goodrich by UTC is complete. For illustrative purposes, at the end of 2011, AEC had gross assets of £116m and net assets of £8m.
In addition Rolls-Royce will assume full responsibility for AEC’s external debt of c £54m at the end of 2011 as well as AEC’s defined benefit pension scheme, which had a c £1m deficit at the end of 2011.
