Rolls-Royce sells parts maker L'Orange to Woodward for 700 million euros

FILE PHOTO: A Rolls-Royce engine of an Airbus A350-900 of Ethiopian Airlines is photographed during a site-inspection at Fraport airport in Frankfurt, Germany, May 22, 2017. REUTERS/Kai Pfaffenbach /File Photo

LONDON (Reuters) - Britain's Rolls-Royce RR.L said it had agreed to sell its Germany-based diesel parts maker L'Orange to U.S.-based engineering company Woodward Inc WWD.O for 700 million euros ($859 million), as part of a plan to simplify its business.

Rolls CEO Warren East has been trying to streamline the company during his nearly three years in charge as part of a turnaround plan to counter declines in some of its older aero-engine programs and plunging demand for oil equipment.

The company said on Monday that L’Orange would continue as a key supplier to its power systems business, which makes engines for use in trains, agriculture and mining, under a 15-year agreement.

“This transaction builds on the actions we have taken over the last two years to simplify our business,” East said in a statement.

“The divestiture of L’Orange enables Rolls-Royce Power Systems to focus on other long-term, high growth opportunities and our company to allocate our capital to core technologies and businesses that drive greater returns for the group.”

Rolls had announced in January that it was reviewing strategic options for L’Orange.

Another part of East’s simplification plan is the potential sale of the company’s loss-making commercial marine business, which designs and makes equipment used in oil and gas extraction. That unit is also under review.

Rolls-Royce said in March that it would update on that process in May at its annual meeting or in June at an investor day.

Reporting by Sarah Young; editing by Kate Holton