Daimler, Rolls Aiming for Joint Takeover of Tognum

March 14, 2011
Venture would combine assets in diesel engine market

Daimler AG and Rolls-Royce Group Plc have formed a joint venture to acquire Tognum AG, a designer and manufacturer of heavy-duty diesel engines. There is no indication of the value of the acquisition, nor its timetable. Daimler and Rolls-Royce are proposing that each of them would be an equal owner of Tognum.

Tognum directors have endorsed the takeover in principle, though no formal bid has been offered and no official response has been made. “We would create one of the world’s technology leaders in propulsion systems and distributed energy systems,” according to Tognum CEO Volker Heuer. “For us, Daimler and Rolls-Royce would be two financially strong strategic investors, who have made a clear commitment to Tognum’s continued internal and external growth strategy. It would put us in an excellent position to play an active role in shaping the further consolidation of the market.”

Tognum is a former DaimlerChrysler division that was sold to private investors in 2006, and then made a public offering in 2007. It supplies diesel engines, propulsion systems, and components for marine, energy, defense, and other industrial markets. The two prospective partners state Tognum would complement Daimler’s capabilities in engine technology and manufacturing, and access to global markets, as well as Rolls-Royce’s capabilities in integrated power systems and services, and market position in the marine, energy and defense markets.

Tognum’s operating divisions include the off-highway engine division of Detroit Diesel (the on-highway engine division is owned by Daimler); L’Orange GmbH, which develops injection systems for medium and high-speed diesel engines; and MTU Friedrichshafen, which manufactures diesel engines for locomotives, ships, military vehicles, agriculture, mining and construction equipment, as well as diesel generators and molten carbonate fuel cells.

The proposed joint venture would combine Tognum with Bergen, Rolls-Royce’s gas and diesel medium-speed engine business. The Bergen assets include a state-of-the-art ferrous foundry at Bergen, Norway. Bergen diesel and gas are marketed through Rolls-Royce’s marine and energy divisions.

Dr. Dieter Zetsche, chairman of the board of Daimler said: "Tognum is an excellent company, and the combination with Daimler and Rolls-Royce creates a win situation for all parties. The planned combination will provide a strong platform to realize the huge market potential."

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