Rolls-Royce and Woodward, Inc. jointly announced that Woodward will acquire fuel injection specialist L’Orange GmbH, part of Rolls-Royce Power Systems. The agreement includes L’Orange‘s operations in Germany, the United States and China, for an enterprise value of €700 million (US$859).
L’Orange supplies fuel injection technology for engines in applications such as oil and gas processing, marine power and propulsion systems, power generation and special-application vehicles. Its customer base includes diesel engine manufacturers worldwide, including Rolls-Royce Power Systems’ subsidiaries, MTU Friedrichshafen and Bergen Engines, as well as other low- and high-speed engine manufacturers.
After the acquisition, L’Orange will be renamed Woodward L’Orange and be integrated into Woodward’s Industrial segment. Woodward said it expects the acquisition to establish it as a premier technology and system provider of engine control systems to the industrial engine market and the complementary portfolio from L’Orange will open up to further expansion into key industrial segments and geographies, while boosting profitability.
Rolls-Royce said L’Orange will remain an important partner and supplier for MTU and Bergen in the future through long-term supply agreements, with an initial term of 15 years.
“This transaction builds on the actions we have taken over the last two years to simplify our business,” Warren East, CEO of Rolls-Royce, said. “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.”
In January, Rolls-Royce had announced that it was reviewing its strategic options for L’Orange. The company’s intellectual property portfolio includes over 55 active patents, with 75 patents pending. In 2017 L’Orange’s pro forma sales were €244 million, with underlying EBITDA of €74 million and operating profit of €64 million.
“L’Orange is an excellent strategic and financial fit for Woodward, and this transaction exemplifies our acquisition strategy to invest in markets with solid long-term fundamentals,” said Thomas A. Gendron, chairman and chief executive officer of Woodward. “The acquisition of L’Orange brings innovative technology, bolsters relationships with key customers and enhances the profitability of our Industrial segment.”
The transaction has been approved by the boards of directors of both Rolls-Royce and Woodward, as well as the Supervisory Board of Rolls-Royce Power Systems. The transaction is expected to close by the end of the second quarter of 2018, subject to clearance from German antitrust authorities.