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Rolls Royce Divests Helicopter Engine Stake

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Integrated power solutions provider for civil and defence aerospace, marine and energy markets Rolls Royce Holdings plc (RYCEY) recently divested its 50% stake in the joint venture that manufactures helicopter engines. The business was sold for €293 million ($386 million) to Turbomeca, a French manufacturer of low- and medium-power gas turbine turbo-shaft engines for helicopters and subsidiary of Safran SA (SAFRY).

Post-acquisition, Turbomeca will be the sole designer and manufacturer of the RTM322 engine, which powers the Apache helicopters of The Boeing Company (BA) and EH101 Merlin and NH90 helicopters of AgustaWestland, a British-Italian multinational helicopter manufacturing company and a wholly-owned subsidiary of Finmeccanica SpA (FINMY).

The asset sale is part of the corporate strategy of Rolls Royce to increase its liquidity. However, despite the joint venture sell-off, Rolls Royce will continue with its other existing engine manufacturing programs like the RRTM Adour engine, which powers the BAE Systems-made Hawk and Anglo-French Jaguar jets.

In late 2011, Rolls Royce sold its 32.5% stake in engine-maker International Aero Engines (IAE) for $1.5 billion (£962 million) to Pratt & Whitney, an operating unit of diversified business conglomerate United Technologies Corp. (UTX). IAE is a consortium of specialized global engine-makers including Pratt & Whitney, the Japanese Aero Engine Corporation (:JAEC) and the German MTU Aero Engines GmbH.

Rolls Royce is the second largest aircraft engine producer after GE Aviation Systems, an operating unit of General Electric Company (GE). General Electric is one of the largest and most diversified technology and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products, the company serves over 100 million customers worldwide.

Rolls Royce currently has a Zacks Rank #2 (Buy).

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