FARNBOROUGH, England (Reuters) - Britain’s Rolls-Royce (RR.L) said it would buy the 53.1 percent of Spain-based aircraft engine and components maker ITP it does not yet own for 720 million euros (£614 million), in a deal which will up its exposure to its Trent aero-engine revenues.
Rolls-Royce’s acquisition of Bilbao-based Industria de Turbo Propulsores (ITP) follows Britain’s vote in June to leave the European Union, which is causing uncertainty for businesses as they are unsure what sort of relationship the UK and the EU will have in future.
But Rolls-Royce Chief Executive Warren East said that “Brexit” did not come into the decision to take full ownership of ITP, based inside the EU.
“We didn’t analyse this from the point of view of Brexit at all,” East told reporters at the Farnborough Airshow on Monday.
East had said before the vote that Rolls-Royce, headquartered in Derby, central England, would be better off if the UK stayed in the EU, warning that leaving could result in some investment decisions being put on hold.
“Brexit has happened and clearly this (the ITP deal) strengthens our position in Europe but we already have a strong presence in Europe with or without Brexit,” East said.
The deal came about after co-owner SENER Grupo de Ingeniería exercised its put option, and Rolls-Royce said that the pair’s 2003 agreement allowed it the flexibility to settle up to 50 percent of the purchase price in shares.
East, leading a turnaround plan at Rolls-Royce to reverse an expected halving of the engine-maker’s profit in 2016, said Rolls-Royce did not need new funds to pay for the acquisition.
“We have sufficient confidence in our balance sheet that actually we will just fund this,” he said.
Upon completion of the deal, expected in six months, Rolls-Royce said it would start to earn additional revenues from the Trent 1000 and Trent XWB engines it builds for wide-body jets and the sales it makes from servicing the equipment.
ITP’s high-value technical components account for about 10 percent of revenues on those Trent engines, meaning that post-deal Rolls-Royce will receive around an incremental 5 percent of Trent revenues.
Additional reporting by Paul Sandle; Editing by Kate Holton and Mark Potter