Rolls-Royce in Talks to Buy Wärtsilä Ship Power

Wärtsilä’s Trieste-based engine manufacturing facility, image: gCaptain

By Aaron Kirchfeld, Trista Kelley and Robert Wall

Rolls-Royce Holdings Plc (RR/), the second-largest maker of airliner engines, is exploring an offer for the marine-propulsion unit of Finland’s Wärtsilä to boost non-aerospace sales, said three people familiar with the matter.

Rolls-Royce has contacted Helsinki-based Wärtsilä about its interest in the division, said two of the people, who asked not to be identified because the deliberations are private. The Finnish company, which has received interest from other potential buyers in the past, may oppose a sale, they said.

A takeover of Wärtsilä’s ship-power division, the largest maker of engines for tankers, cruise ships and navy vessels with sales of 1.3 billion euros ($1.8 billion) in 2012, would strengthen Rolls-Royce’s marine unit, which cut its profit outlook in November. The British company teamed up with Daimler AG (DAI) to buy Germany’s Tognum AG in 2011 to gain the world’s second-biggest manufacturer of high-speed diesel engines for the marine, energy and defense industries.

Representatives for London-based Rolls-Royce and Waertsilae declined to comment on a possible transaction.

Wärtsilä and Sweden’s Wallenberg family, which owns a stake, are reluctant to sell the marine unit, where they see growth potential, and have resisted previous approaches, two of the people said.

Seeing Potential

Rolls-Royce’s marine unit has equipment on more than 30,000 vessels and serves 4,000 customers in the offshore, merchant, naval, fishing and submarine industries, according to its website. The marine business had revenue of about 2.25 billion pounds ($3.7 billion) in 2012, of which 43 percent came from services.

Read:Wärtsilä’s Secret Weapon Revealed

A sale of Wärtsilä’s marine division would leave it focused on supplying power plants and services. The ship-power business accounted for 28 percent of the companys total net sales of 4.73 billion euros in 2012, according to its website. The company has a market value of about 6.7 billion euros.

The Finnish company generates 32 percent of sales from power plants and 40 percent from services. The marine unit employs 2,139 workers. Wärtsilä’s largest shareholder is Avlis AB, which is jointly owned by Finland’s Fiskars Oyj (FIS1V) and Investor AB (INVEB), the investment company of the Wallenbergs.

(c) 2014 Bloomberg

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