Daimler And Rolls-Royce Link-Up With Tognum Bid
Rolls-Royce and Daimler have formed a joint venture company and will bid US$4.4 billion for German industrial engine and turbine maker Tognum. However, analysts believe the pair will eventually need to increase their offer for Tognum whose engines business unit includes MTU engines. The public tender offer is intended to be carried out by a 50:50 joint venture company comprising Tognum and Bergen, Rolls-Royce’s Norwegian-based gas and diesel medium-speed engine business. Listed on the Frankfurt Stock Exchange, Tognum AG supplies engines, propulsion systems and components for marine, energy, defense, and other off-highway industrial applications.
The bidders said the markets in which the joint venture will operate “are attractive and fast growing, especially in the developing economies.” The deal could also herald a round of investment in new factories by the joint venture with Daimler and Rolls-Royce stressing they planned to keep current manufacturing sites and said they were confident that the growth strategy will secure jobs. Sir John Rose, chief executive Rolls-Royce said, “The complementary capabilities we are bringing together will provide us with a world leading proposition and will enable us to expand the business by developing a broader portfolio of integrated power systems and services for existing and new customers.” Dr. Dieter Zetsche, chairman of the Board of Management of Daimler AG, said, “It is an exciting proposition for Daimler to partner with Rolls-Royce to further invest in the Tognum business to create growth for the company and create additional value for our shareholders as well as for the customers and employees of Tognum.” Daimler already owns a 28% stake in Tognum.
Although Daimler, whose divisions include the Mercedes-Benz car brand and Daimler Trucks, and Rolls-Royce are digging deeply to fund the proposed deal both groups are in a strong financial situation. But the acquisition marks an interesting departure from normal strategy for Rolls who have tended to focus on internal, organic growth rather than large scale takeovers.
Interestingly, the proposed purchase comes as Sir John, one of Britain's leading industrialists, is about to retire and be replaced by John Rishton, a former British Airways finance director. Whether the change at the top marks the start of a more aggressive takeover period in the history of Rolls remains to be seen.