(Reuters) - Britain’s Rolls-Royce (RR.L) said on Tuesday it was in talks with Germany’s Siemens AG (SIEGn.DE) to sell a unit that makes equipment for the oil and gas industry and power-generation gear for utilities.
Sources familiar with the matter told Reuters earlier that Siemens was considering paying just under 1 billion euros ($1.38 billion) for Rolls-Royce’s energy businesses outside of the nuclear industry.
Siemens’ talks with the British company are part of a new strategy that the German engineering group will present on May 7, a Siemens spokesman said.
The news comes on the same day Siemens said it would make an offer for French engineering group Alstom’s (ALSO.PA) power business if it is given enough time to draw up a detailed plan to rival a bid by General Electric (GE.N).
Rolls-Royce’s energy and nuclear business had revenue of 1.54 billion pounds ($2.59 billion) in 2013, the company said on its website. Excluding nuclear, the unit had revenue of about 940 million pounds.
“We’ve always felt that (the unit) would be better suited elsewhere as it appears sub-scale against larger competitors like GE (GE.N), Mitsui (7003.T) and Siemens,” RBC Capital Markets analyst Robert Stallard wrote in a note to clients, adding that he expected news of the potential deal to be well received.
“We wouldn’t be surprised to see some future agreement include a provision for Rolls to keep injecting technology into a Siemens-owned business.”
Sources said the talks between Rolls-Royce and Siemens had been going on long before the Alstom deal cropped up.
Writing by Richa Naidu; Additional reporting by Alex Huebner, Arno Schuetze, Maria Sheahan and Sweta Singh; Editing by Erica Billingham and Leslie Adler