Kongsberg to acquire Rolls-Royce commercial marine business

Kongsberg CEO Geir Håøy (right) and Tristan Halford-Maw, Deputy Director, M&A Rolls-Royce Kongsberg CEO Geir Håøy (right) and Tristan Halford-Maw, Deputy Director, M&A Rolls-Royce

JULY 6, 2018 — Kongsberg Gruppen ASA has entered into agreement with Rolls-Royce plc to acquire Rolls-Royce Commercial Marine in an agreement valued at GBP 500 million (about $662 million).

Kongsberg is to acquire the marine products, systems and aftermarket services businesses carried out by subsidiaries of Rolls-Royce plc. The transaction does not include Bergen Engines or Rolls-Royce's Naval Business.

The move follows a strategic review by Rolls-Royce of its Commercial Marine operations announced in January 2018. The business has approximately 3,600 employees, with the majority based in the Nordic region. In 2017 the e business generated revenue of GBP 817 million (about $1.1 billion) with an operating loss of GBP 70 million (about $93 million).

"The maritime industry has over the last years experienced demanding market conditions and even though there is still uncertainty we expect the market to be facing growth with technology and innovation being key drivers. For more than 200 years Kongsberg has been a pioneer for high technology industrial development with a long term perspective. The acquisition of Rolls-Royce Commercial Marine is in line with our growth ambitions," says Eivind Reiten, Chair of the Board of Kongsberg.

"The acquisition of Rolls-Royce Commercial Marine makes us a more complete supplier to the maritime industry. The maritime industry is becoming increasingly globalized and is undergoing considerable technological and market driven changes. With this acquisition we will strengthening our strategic position with shipowners, shipyards and other customers and partners," says Geir Håøy, CEO and President of Kongsberg.

"This deal is good news for Rolls-Royce and Kongsberg and comes at a time when the maritime industry is at the dawn of a new and exciting era where digital and electrical technologies will transform shipping. Rolls-Royce has been responsible for leading many of those technological advancements, and with combination of great people, market leading technology and a desire by Kongsberg to take this business to the next level, I'm sure that this business will prosper in the years to come," says Mikael Makinen, Rolls-Royce President, Commercial Marine.

Kongsberg will finance the acquisition of Rolls-Royce Commercial Marine through a combination of new equity and a new bond loan. The purchase price will be paid in cash upon completion of the transaction.

The new equity will be raised through an underwritten rights issue of NOK 5.0 billion. The share capital increase is conditional upon approval by the by Kongsberg's general assembly with the support from at least two-thirds of the votes. Kongsberg is 50% owned by the Norwegian state and the Norwegian government has communicated that it is positive that the state as an owner participates with its 50% ownership share in the rights issue, pending Parliamentary consent and acceptable terms of the rights issue in line with commercial terms.

The remaining 50% of the rights issue is underwritten by a syndicate consisting of DNB Markets, a part of DNB Bank ASA and Danske Bank A/S, Norwegian Branch and certain larger pre-committing shareholders.

Shareholders now representing 19.7% of the shares have undertaken to vote in favor of the rights issue at the Kongsberg general meeting. Together with the state, these shareholders represent 69.7% of the shares in the company.

Kongsberg is planning to issue a new bond loan. Nordea Bank AB (publ) filial i Norge has undertaken to provide a bridge loan in the event that the bond loan has not been issued prior to completion of the acquisition of Rolls-Royce Commercial Marine.

The completion of the acquisition of Rolls-Royce Commercial Marine is subject to clearance by regulatory authorities in several jurisdictions. Subject to that regulatory clearance, the acquisition of Rolls-Royce Commercial Marine is expected to be completed in first quarter of 2019.

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