Rolls-Royce energy unit sale to Siemens better than expected, says Investec

7th May 2014 10:31

Investec has reiterated its 'buy' recommendation for engine maker Rolls-Royce, saying that the sale of its energy gas turbine and compressor business to Siemens is a 'good deal'.The unit, which supplies aero-derivative gas turbines, compressor systems and related services to customers in the oil and gas and power generation sectors, is to be sold for £785m in cash.As part of the deal, Rolls-Royce will also receive a further £200m for a 25-year licensing agreement, giving Siemens access to relevant technology."Deal is positive, in our opinion. Rolls is selling a business that has struggled to achieve scale and cash will help fund acquisition of Daimler's 50% stake of Tognum," the broker said.Investec said that the total value of the deal - being £785m + £200m - is better than what the market had anticipated, following press reports that Siemens would pay up to €1bn (around £830m)."However, it looks unlikely to be a catalyst for a significant re-rating."The next such catalyst for Rolls-Royce will be its investor day in June, Investec said, when management are expected to discuss group strategy, capital allocation and M&A, future guidance and TotalCare accounting.The broker has placed its 1,160p target price under review following Wednesday's deal.The stock was down 1.1% at 1,028.05p by 10:44.BC