Rolls Royce sells its share of IAE to Pratt & Whitney

[WHBM]

P&W now own most of the shares in IAE, as Rolls Royce sell out.

BBC News - Rolls-Royce sells its share in IAE to Pratt & Whitney (http://www.bbc.co.uk/news/business-15287764)

always played second fiddle to the CFM56. £950m doesn't seem a lot for a one-third share of such a business.

[Torquelink]

. . but is setting up another joint venture to develop engines in the same space. Why not just agree to develop the new engines within IAE as PW originally proposed? WIHIH?

:confused:

[Flapping_Madly]

Press statements are always just one way -the best-way of putting things but this did read a bit odd. They sell their share to their greatest rival--the other partners stay in--and then they enter a fresh partnership with their greatest rivals to develop new engines in the same segment.

Doh !! I am obviously missing summat. I know it gives them a small peek at P&W's Airbus neo engine which Royces decided to leave alone.
Smart move that with the damn planes flying off the shelf.

Or am I barking mad--again.
Should I worry about RR's long term future and my shares?
I do hope more comments are headed for this thread.

[The Ancient Geek]

Should I worry about RR's long term future and my shares?



The V2500 is essentially a dead end now that Airbus has announced the re-engined A320 family. The future is in the next generation of engines which will power the clean sheet A320 and 737 replacements in around 10 years time. A new engine takes around 10 years to develop.

The market has spoken and my RR shares are up almost 10% in one day.
Up from 298 to 688 since march 2009, they seem to be getting it right.
YIPPEEE !!!!!

[Papa2Charlie]

Ultimately this will be a good move for RR. The sale of the IAE stake generates $1.5bn this year along with revenue of about £140m per annum from the business for the next 15 years. RR will still make money on the supply of spares for the engine along with assembling 50% of the engines....again for a fee most likely.

The v2500 as it stands will die out. RR has much bigger fish to fry at the moment with delivering the Trent XWB, Trent 1000 and managing a growing installed fleet. Having missed the NEO platform, it makes little sense for RR to maintain a stake in a JV that isn't dveloping new engines.

The JV with Pratts will be low key for several years during which RR can deliver the above programmes and PW can get on with the GTF. When the next gen narrow body comes round, both companies will have the resource and the capability to support a new product development. Had RR maintained it's stake in IAE, it would have ultimately lost out on the inherent value in the company and also allows RR to free up a significant sum to support future take overs, re-investment in the company or dividends to the shareholders.

[Torquelink]

Good explanation P2C.

As a sharehoder too I am pleased to see the immediate share price effect but I'm a bit less sure about how this will position RR going forward. It does seem that, despite brave words about continuing their stand-alone smaller engine research programmes, they have finally conceded that the GTF is the way ahead i.e they have conceded the principal game-changing technology to PW: putting PW in the driving seat going forward and giving them the opportunity to call the shots. Clearly, RR still have the lead on large engines - the PW4000 being pretty much defunct - but, in future, if gears prove more effective than a third spool for larger engines too, this might also become PW's technological baby.