No deal as Rolls ends Wartsila takeover talks

ENGINEERING company Rolls-Royce made a takeover approach to Finnish ship and power plant engine maker Wartsila but the talks ended without a deal, the two companies said yesterday.

Shares in Wartsila, with an enterprise value of around €7.3bn (£6bn), rose more than 11 per cent after the companies confirmed the preliminary talks. They had discussed an acquisition of Wartsila’s entire business rather than just its marine unit, as had been suggested by earlier reports.

Rolls-Royce, the world’s second-largest aircraft engine maker behind General Electric, has benefited from soaring demand for more fuel-efficient engines for planes by Airbus and Boeing

Buying Wartsila would have strengthened Rolls-Royce’s marine business, which lowered its profit guidance in November.

It was not clear why the talks were terminated or whether Rolls-Royce had offered a clear price for the business. Wartsila has reported rising profits in recent years and is under little pressure from shareholders to abandon its independence.

But Liberum Capital analyst Ben Bourne said Wartsila’s status as a leader in marine engines made it an appealing target.

“If you were Rolls-Royce, why would you not look at that opportunity?” he said. “You could become the dominant player in both civil aircraft wide-body engines and also marine engines.

This seems perfectly sensible at the right price.”

Wartsila’s third-quarter results beat market expectations, with the help of higher spending by its shipping clients. In addition to ship engines, the company also sells power plant engines and maintenance services.

The company was founded 180 years ago as a sawmill in the eastern region of Karelia. Its largest owner is a joint venture of Finland’s Fiskars and Investor AB, the investment arm of Sweden’s Wallenberg family.