German automotive giant BMW has sold 64% of its shares in Rolls-Royce and looks set to pull out completely from the aero engine sector upon which it was founded over 90 years ago.
Over the weekend the BMW Group announced it was to reduce its stake from a little over 9% to around 3.25%, which amounts to over 100 million shares, adding 80 million to an initial decision to shed 21 million. BMW was until last week the single largest R-R shareholder. It is as-yet unclear who has bought the shares.
BMW is to receive a €300 million ($356 million) "non-cash gain" from the sale. In December 2003, BMW raised €561 million by issuing a five-year bond with an annual coupon of 1.87%, exchangeable into R-R shares. Once the shares reached a certain level, then investors could either receive cash or stock in R-R, BMW says. More investors are expected to take up the offer, reducing BMW’s holding further, the company adds.
The exit from R-R would mark the end of BMW’s history in aero engines that predates car production. BMW started production of aircraft engines in 1913 when predecessor Motorenfabrik Oberursel acquired the licence to build the Seguin brothers’ 50hp (37kW) Gnome rotary engine and developed its own 7-14 cylinder versions.
The holding is the remainder of the BMW Rolls-Royce joint venture set up in 1990 to develop and produce the BR700 family of business jet and regional jet turbofans. The joint venture marked the return to aero engine manufacturing after the suspension of activities following the Second World War. The facility, based in Dahlewitz near Berlin became the development and assembly centre for BR700 engines in 1992 on the back of an order for 200 of the type from launch customer Gulfstream, which used the BR710 engine to power the GV business jet.
However, BMW has been edging out of the company since 1999 when BMW R-R was dissolved and renamed R-R Deutschland and taken fully into the global R-R group. BMW's 50% share was converted to a 9% holding in R-R. BMW had been seeking an exit for several years, as the aero engines asset affected Munich-based BMW's profit reporting due to the obligation to record notional losses on the R-R stake as the engine maker's stock fell last year.
Source: Flight International