Kongsberg group in Norway has agreed to buy Rolls-Royce’s commercial marine business for an enterprise value of £500M (US$662M) in the second major consolidation within the 'smart' shipping sector in recent weeks.
Kongsberg’s purchase includes Rolls-Royce’s ship intelligence activities, which have developed technologies to enable remote and autonomous operation of commercial vessels among other maritime advancements.
The move, announced today, comes about two months after Finland-based Wärtsilä finalised its acquisition of maritime intelligence specialist Transas in May, in a deal worth an estimated US$250M.
Kongsberg will acquire the propulsion, deck machinery, automation and control and the smart shipping technology divisions of Rolls-Royce’s portfolio. The sale also includes Rolls-Royce’s ship design capabilities, which focus on offshore, cargo, passenger ships and fishing vessels.
Kongsberg chief executive and president Geir Håøy said the Rolls-Royce acquisition makes the group “a more complete supplier to the maritime industry”.
“With this acquisition, we will strengthen our strategic position with shipowners, shipyards and other customers and partners,” he said.
He added that the maritime industry is globalising and undergoing considerable change driven both by technology and market forces.
Development of autonomous vessel and remote control technologies as well as intelligent awareness solutions are a few of the recent technological advancements for which Rolls-Royce's commercial marine division has been responsible under the leadership of division president Mikael Makinen.
Mr Makinen (pictured above) said the deal “marks the start of a new horizon” for the business.
“I believe we have found a very good home for our business, with Kongsberg," he told this publication. "We are two very complimentary businesses, and together have great potential to be one of the world’s leading technology companies in the maritime industry."
“Both Rolls-Royce and Kongsberg have been playing leading roles in developing the technologies that will shape the future of our industry in decades to come. Also, both companies have fantastic heritage which underpins our respective capabilities, today. The coming together will create a powerful force, especially as we move towards more remote and autonomous technologies becoming commonplace in shipping."
Mr Makinen spoke to this publication in May about an impending sale of his division and the dedication of his team in developing new technologies explaining that he was "on the same side of the table" as his employees and would leave Rolls-Royce once the sale is complete.
When asked whether he or any of his team would be moving to Kongsberg, Mr Makinen's office said the leadership team is currently "focused on running the business".
“For now, I have been busy talking with my colleagues and customers around the world, as they reflect on today’s announcement. I believe this will be broadly welcomed across my business and look forward to working with Kongsberg as we work to separate then integrate the business,” Mr Makinen said.
In January of this year, Rolls-Royce undertook a strategic review of its operations, suggesting it was considering selling its commercial marine business to ‘simplify’ its business and focus on its three core units based around civil aerospace, defence and power systems.
As such, Rolls-Royce will retain its power systems division including both Bergen Engines and its MTU division which offer a range of both diesel and gas medium-speed engines.
The transaction has been approved by the boards of both Rolls-Royce and Kongsberg and is expected to close in Q1 2019, subject to clearance from the regulatory authorities.
After deducting pension liabilities and provisions, separation costs, advisor fees and working capital, the sale is expected to net Rolls-Royce proceeds of £350M to £400M.
Rolls-Royce said money from the sale “will be used to improve the resilience of the balance sheet and provide additional capital to judiciously pursue opportunities that will drive greater returns for the group”.
Martyn Wingrove and Jamey Bergman provided reporting and editing for this story.