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Rolls-Royce Holdings PLC ADR RYCEY

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Morningstar’s Analysis

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Rolls-Royce Announces Long-Awaited Sale of ITP Aero for EUR 1.70 Billion

Joachim Kotze Equity Analyst

Analyst Note

| Joachim Kotze |

Narrow-moat Rolls-Royce reached an agreement to sell 100% of its stake in ITP Aero to a consortium led by Bain Capital for total proceeds of EUR 1.70 billion (GBP 1.45 billion) equating to a total enterprise value of EUR 1.80 billion. The share price reacted positively to the news, trading 10% higher intraday, and while the proceeds from the sale are in line with our GBP 1.50 billion estimate, we view this as positive news from a capital restructuring and investor sentiment perspective. We will make no changes to our GBX 110 (ADR: $1.53) fair value estimate as the sale proceeds are already factored into our forecasts. We continue to prefer wide-moat peer Safran, which offers a more attractive risk/return profile.

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Company Profile

Business Description

Rolls-Royce operates three core business segments: civil aerospace, power systems, and defense. The civil aerospace segment builds engines powering wide-body aircraft, regional and business jets, and offers aftermarket services. Twenty years ago, the firm pioneered full-service flight hour contracts with the TotalCare package. Power systems provides power solutions to multiple end markets (defense, agriculture, marine, and power generation) while the defense business provides military, ground vehicle and naval propulsion solutions.

Contact
90 York Way, Kings Place
London, N1 9FX, United Kingdom
T +44 2072229020
Sector Industrials
Industry Aerospace & Defense
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 48,200