Daimler, Rolls-Royce in joint bid for Tognum

[March 09, 2011]  LONDON (AP) -- Aircraft engine maker Rolls-Royce Group PLC and car and truck maker Daimler AG confirmed widespread speculation Wednesday that they have formed a joint venture to buy German engine parts supplier Tognum AG for euro3.2 billion ($4.4 billion).

The two companies said their 50-50 joint venture was offering euro24 per share for all the share capital of Tognum. That's a 30 percent premium over Tognum's share price on Friday, before rumors of the deal surfaced.

The joint venture would also acquire the 28 percent stake that Daimler already holds in Tognum, which is based in Friedrichshafen, Germany. Tognum confirmed on Monday that it was in talks with Rolls-Royce and Daimler.

The joint venture would also take over Rolls-Royce's Bergen engine division.

Tognum produces engines, propulsion systems and components for marine, energy, defense and other industrial applications.

"The planned combination will provide a strong platform to realize the huge market potential," said Dieter Zetsche, chairman of Daimler' board of management.

Daimler CEO Dieter Zetsche said that the tie-up with Tognum would offer strong growth potential both in emerging markets, where demand is strong, and in richer countries, where older existing engines will need newer, more environmentally friendly replacements.

"This is not about synergies on the cost side, but about growth potential," Zetsche said. He said the deal was not aimed at cutting jobs and said that it was "good news for the workers."

"The complementary capabilities we are bringing together will provide us with a world leading proposition, and will enable us to expand the business by developing a broader portfolio of integrated power systems and services for existing and new customers," said Sir John Rose, CEO of Rolls-Royce Group.

Rolls-Royce shares were up 2.7 percent at 616.5 pence in early trading on the London Stock Exchange, while Daimler's stock rose 1 percent to euro49.75 in Frankfurt.

Rolls Royce Group, which makes aircraft engines and marine propulsion systems, is different from the luxury car maker, which belongs to German carmaker BMW AG.

[Associated Press; By ROBERT BARR and DAVID MCHUGH]

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