* Wartsila shares rise 8 pct
* Wartsila owner vows long-term commitment
* Analysts say Rolls seems to be on M&A track
By Jussi Rosendahl and Karen Rebelo
HELSINKI/BANGALORE, Jan 9 British engineering
company Rolls-Royce made a takeover approach to Finnish
ship and power plant engine maker Wartsila but the
talks ended without a deal, the two companies said on Thursday.
Shares in Wartsila, with an enterprise value of around 7.3
billion euros ($9.9 billion), rose more than 8 percent after the
companies confirmed the preliminary talks. The Finnish company
said they had discussed an acquisition of the entire business
rather than just its marine unit, as suggested by earlier
By buying Wartsila, Rolls-Royce would have strengthened its
marine business, which lowered its profit guidance in November.
Rolls, the world's second-largest aircraft engine maker, has in
recent years benefited from soaring demand for more
fuel-efficient engines for planes by Airbus and Boeing
It was not clear why the talks with Wartsila were terminated
or whether Rolls-Royce had offered a clear price for the
business. Analysts said Wartsila was under little pressure from
shareholders to abandon its independence after reporting steady
profits in recent years.
Wartsila's largest owner, with a stake of 22 percent, is a
joint venture of Fiskars, which is backed by
Finland's Ehrnrooth family, and Investor AB, the
investment arm of Sweden's Wallenberg family. Fiskars said both
companies remained long-term investors in Wartsila.
"Together with Investor AB we are a strong committed owner
for Wartsila with a long-term horizon," spokeswoman Anu Ilvonen
LEADER IN MARINE ENGINES
Wartsila's third-quarter results beat market expectations,
with the help of higher spending by its shipping clients.
In addition to ship engines, the 180-year-old company also
sells power plant engines and maintenance services. In 2012, the
group earned 481 million euros of operating profit with sales of
4.7 billion euros.
Pohjola Markets analyst Pekka Spolander said it made sense
that Rolls-Royce had wanted the entire company as Wartsila's
services business depended on its engine sales, while its ship
and power plant engines are made in the same factories.
"Wartsila's units are so tightly linked together that it
would be difficult to detach one piece from the company."
He also noted that Wartsila had been known over the years
for paying generous dividends, which might make its owners
reluctant to give up their shares.
Wartsila's status as a leader in marine engines made it an
appealing target for Rolls-Royce, London analysts said.
"If you were Rolls-Royce, why would you not look at that
opportunity?" said Liberum Capital analyst Ben Bourne.
"You could become the dominant player in both civil aircraft
wide-body engines and also marine engines. Seems perfectly
sensible at the right price."
Rolls-Royce shares fell 1.1 percent, with analysts saying it
was likely to remain on the look-out for acquisitions.