(Editor’s Note: Ian Cameron formerly worked for Rolls-Royce)
Despite its standing as arguably the most famous brand name in the world, Rolls-Royce has traditionally been notoriously shy about wading into the world of mega deals and corporate takeovers.
Rolls just doesn’t do headline-grabbing acquisitions. It usually grows organically and its largest ever purchase – that of Vickers for £576 million – was as long ago as 1999. At the time it was a substantial amount to pay but by today’s going rates it feels somewhat lightweight.
Yet this week Rolls-Royce surprised analysts when it was revealed that, along with Daimler AG, it is in talks with German engine and propulsion systems company Tognum about a possible joint bid for control of the latter that probably values the target at more than US$4 billion.
Tognum’s products go for off-highway applications and distributed energy systems. It has two business units, Engines and Onsite Energy & Components. The former comprises the MTU range of engines for ships, rail, defence, heavy land vehicles and oil and gas with the other business units including the brand MTU Onsite Energy and also fuel injection systems from L’Orange.
Of course, it would be a hefty price to pay by Rolls and Daimler but, then again, both can afford it.
According to the latest financial results, Rolls-Royce has a very healthy order book worth around $96 billion at today’s rates whilst Daimler is currently cashing in on booming Mercedes-Benz car sales.
It seems though that the strategic advantages for Rolls-Royce greatly outweigh those for car and truck maker Daimler which already owns 28% of Tognum.
In particular, Tognum’s marine interests would sit nicely with those of Rolls-Royce. Should a deal go through, and it’s not yet certain, Rolls would probably integrate its Bergen diesel and gas engine portfolio (acquired as part of the Vickers deal) with Tognum.
The Marine arm of Rolls-Royce has developed strongly over recent years earning around $541 million in underlying profits for the group in the last financial year. Tognum’s profitable energy business could also be welded onto Rolls-Royce’s.
So as the accountants from all sides work on the figures, it could be that the headline writers are also making their plans.
