Rolls-Royce and Babcock sell stakes in Airtanker Holdings

·2-min read
A Rolls Royce jet engine is seen on Boeing 787-10 on the static display during the 52nd Paris Air Show at Le Bourget Airport near Paris, France June 20, 2017. REUTERS/Pascal Rossignol
Engineering firm Rolls Royce said it will sell its 23.1% shareholding for £189m. Photo: Pascal Rossignol/Reuters

Rolls-Royce (RR.L) and Babcock International (BAB.L) have agreed to sell their stakes in re-fuelling business Airtanker Holdings to Equitix Investment.

Engineering firm Rolls said it will sell its 23.1% shareholding for £189m ($261m), with proceeds to be used to reduce net debt, while defence contractor Babcock is offloading its 15.4% stake for £126m.

Babcock added that the sale is part of its “ongoing targeted disposal programme,” which aims to generate at least £400m of proceeds. It will also use this transaction to reduce net debt after the coronavirus pandemic wreaked havoc on the aviation sector.

The deals are expected to complete by the end of the first quarter of 2022 and/or the end of the businesses financial year, subject to regulatory approvals. 

It will also require consent from the UK’s Ministry of Defence (MoD) and the US Department of State.

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Airtanker Holdings is a joint venture which was also owned by Airbus (AIR.PA) and Thales (HO.PA), and owns 14 A330-200 Voyager aircrafts, which are powered by Trent 772B engines, a derivative of the Trent 700 engine.

The Voyager aircrafts support air-to-air refuelling, air transport and ancillary services for the MoD.

All four firms will retain their stakes in the Airtanker Services business which operates the fleet of refuelling jets.

Rolls Royce
Shares in Rolls-Royce climbed 0.2% higher in early trading in London on Monday. Chart: Yahoo Finance UK

On Monday, Rolls Royce confirmed that it would continue to provide servicing and maintenance for the fleet of the company’s engines that power the Voyager aircraft to support the Royal Air Force.

Tom Bell, president of Rolls-Royce Defence said: “The sale of our shareholding in Airtanker Holdings is another important step towards achieving our group target to generate at least £2bn from disposals, as announced last year, to help rebuild our group balance sheet in support of our medium-term ambition to return to an investment grade credit profile.”

Babcock shares were up in early trading in London on Monday. Chart: Yahoo Finance UK

Meanwhile, Babcock chief executive David Lockwood said: “This the third disposal we have announced as part of our ongoing programme to streamline the Group and, should all complete, ensures we will meet our target of generating at least £400 million of disposal proceeds this financial year.

“We are pleased to continue to maintain an interest in Airtanker through our work with Airtanker Services.”

Shares in both Babcock and Rolls-Royce both climbed higher in early trading in London on Monday.

Watch: Cost cuts, asset sales keep Rolls-Royce on target

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