Rolls-Royce, Babcock sell air-refuelling stakes for £315 million

London

ROLLS-ROYCE Holdings and Babcock International Group sold their combined 39 per cent stake in AirTanker Holdings for £315 million (S$584 million) as the UK firms seek to shore up depleted balance sheets.

Equitix Investment Management will pay £189 million for Rolls-Royce's 23.1 per cent stake in the air-to-air refuelling company, which serves Britain's Royal Air Force, and £126 million for Babcock's 15.4 per cent, according to statements on Monday. Both amounts include the repayment of shareholder loans.

Rolls-Royce and Babcock have embarked on turnaround efforts and are selling assets as they focus on core operations. Rolls-Royce aims to raise more than £2 billion from disposals after the coronavirus hit demand for its large jetliner engines, while Babcock chief executive officer David Lockwood is trying to raise at least £400 million after years of disappointing results.

Even as Rolls-Royce and Babcock sell AirTanker Holdings, they'll maintain their shares in the services arm, which provides operational support to the RAF'S 14 adapted Airbus SE A330 aircraft, known as Voyagers. Shares of Rolls-Royce traded one per cent higher at 8.19am in London, while Babcock was up 0.8 per cent. Both companies are based in the UK capital.

UK aerospace and defence firms have become a popular target for buyers, including private-equity (PE) firms. The government is investigating the proposed purchase of Ultra Electronics Holdings by PE-owned Cobham, while Business Secretary Kwasi Kwarteng has said he's monitoring Parker-Hannifin Corp's plan to buy out parts supplier Meggitt for £6.3 billion.

The AirTanker sale is conditional on regulatory approvals and should complete by the end of 2021, according to a statement from Ashurst, the law firm advising the two manufacturers on the sale. The majority of the business will remain under the control of Airbus SE and Thales SA. BLOOMBERG