(Bloomberg) —
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Rolls-Royce Holdings Plc agreed to sell its Spanish ITP Aero unit to a group led by Bain Capital for 1.7 billion euros ($2 billion), netting the British aero-engine maker much-needed cash to help it recover from the coronavirus crisis.
The deal with Bain and partners JB Capital and Spanish defense firm Sapa will help Rolls rebuild its balance sheet as it seeks to restore its investment-grade credit rating, it said Monday in a statement. The shares jumped as much as 11% on the asset sale and contract win to upgrade engines on U.S. B-52 bomber planes that could be worth as much as $2.6 billion.
The unit sale marks a milestone for Chief Executive Officer Warren East, who set a target to raise at least 2 billion pounds from disposals. Rolls-Royce’s finances were hammered by the outbreak, which gutted long-distance travel on the large aircraft that use the company’s engines. Rolls said in August it was near an agreement for a sale of ITP.
Shares of Rolls were up 10% as of 12:18 p.m. in London, where the company is headquartered. With the ITP sale adding to earlier gains on the contract win, the stock is trading at its highest intraday level since March 2020, at the start of the Covid-19 crisis.
The ITP sale was reported earlier by Sky News.
Bain reached a deal after negotiations that included the Spanish government. ITP Aero will remain based in Zamudio, near Bilbao, and continue to be run by CEO Carlos Alzola.
The U.S. buyout firm will guarantee workforce levels and has plans for further growth, according to the statement. Bain is also open to adding further Spanish and Basque industrial partners to the consortium, reaching up to 30% of the equity, until the end of June next year.
(Updates with company confirmation of sale throughout.)
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