Rolls-Royce Power Systems (then, Tognum) started up this diesel engine plant in South Carolina in 2010, to produce MTU large diesel engines.

Rolls to Buy Daimler’s Stake in Engine Joint Venture

March 9, 2014
Renamed Tognum AG “Ample liquidity” for purchase Marine, off-road, defense, power-gen, distributed power options

Rolls-Royce Holdings will acquire its venture partner venture partner Daimler AG’s half interest in Rolls-Royce Power Systems Holding, the designer and manufacturer of heavy-duty diesel engines formerly known as Tognum AG. The cost of the transfer is to be determined by a formal evaluation, though Rolls-Royce said the option was valued at about $3.2 billion on its balance sheet at the close of 2013.

Rolls-Royce noted it has “ample liquidity” to fund the purchase from available cash and credit facilities. It said the transaction would be completed within the next six months, pending regulatory approvals.

After the two companies acquired the engine builder in 2011, Rolls-Royce took over the industrial management, and according to Daimler “it has developed positively under the industrial management of Rolls-Royce.”

The Rolls-Royce Power Systems name replaced “Tognum” earlier this year, but the business continues to hold a number of noteworthy brands in the industrial engine business, including MTU Friedrichshafen, MTU Onsite Energy, MTU Detroit Diesel, L’Orange GmbH, and Bergen Enines A/S.

The Bergen diesel engines are used in maritime and power generation applications. The Tognum products are diesel engines with up to 9,100 kilowatts (kW) power output, gas engines up to 2,150 kW, and gas turbines up to 45,000 kW. It includes the MTU engines and propulsion systems for ships, for heavy land, rail and defense vehicles, and oil and gas industry. The portfolio also includes distributed energy systems (MTU Onsite Energy), fuel-injection systems (L'Orange), and diesel engines for emergency standby power and continuous power, as well as cogeneration power plants based on gas engines and gas turbines that generate power and heat.

"Rolls-Royce Power Systems has added scale and capability to our reciprocating engines business,” according to CEO John Rishton. “It has outstanding technology, operates in long-term growth markets, and has proved a valuable addition to our Marine and Industrial Power Systems division."

Daimler called Rolls-Royce “the best conceivable owner” for the diesel engine builder, adding it would allow Rolls-Royce to strengthen RRPS by contributing more of its own activities and technologies.

“After the successful cooperation with Rolls-Royce and the positive development of RRPS, we are now taking the next logical step and are transferring our shares to our joint-venture partner,” stated Dr. Dieter Zetsche, Daimler chairman.

Daimler also noted it plans to expand its medium- and heavy-duty diesel engine business with engines and drive systems for off-highway applications, rather than buses and trucks.

CFO Bodo Uebber stated that Daimler will use the proceeds to strengthen its core business.

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