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Deutz gets Compcom green light for Rolls-Royce deal
24 Jun 2024
The Competition Commission has unconditionally approved the proposed acquisition by Deutz of the Rolls-Royce Power Systems (RRPS) business unit. The deal, which was initially announced in December 2023, involves the Frankfurt Stock Exchange-listed off highway power systems manufacturer taking over the supply of lower power range medium duty engine generation (MDEG) and heavy-duty engine platform (HDEP) diesel engines and engine systems for certain off-highway applications and related after-sales services from RRPS in South Africa.
Rolls-Royce power systems include the full MTU business portfolio
These Daimler technology-based engines are primarily used in agricultural and construction machinery. The business unit being acquired generated approximately €100m in revenue in 2022.
Until the transfer of the business is complete, Rolls-Royce's Power Systems division will continue its activities with customer relationships, delivery and service obligations remaining unaffected.
RRPS currently has exclusive rights to the global distribution of off-highway engines using Daimler technology (MDEG, HDEP and Classic engine platforms), with the original contract term set to expire in April 2028.
Following the close of the deal, the Deutz fleet will include non-rail or military vehicle applications of the Series 1000, 1100, 1300 and 1500 engines and the Classic Series OM900 and OM460 in the 75 to 480kW power range.
Dr Jörg Stratmann, CEO of RRPS, said in the December announcement:
As we evolve our strategy, we are also constantly analysing our product portfolio. As a result, we will be concentrating largely on higher-powered systems in the off-highway engine sector, primarily from our in-house production. We have therefore decided to transfer our successful lower-power-range engines business, which uses Daimler technology, to a partner
Deutz will grow SSA presence
Deutz, which has no manufacturing activities in South Africa, currently imports and sells various engine and engine systems in the country.
The acquisition is expected to enhance the company’s presence in the Southern African market, particularly in sectors such as agriculture, industry, and power generation.
This transaction also aligns with Rolls-Royce's strategic focus on power generation, government, marine, service, and battery energy storage systems.
Rolls-Royce anticipates generating gross proceeds of £1bn-£1.5bn from the sale of non-core businesses, including this transaction.
A Competition Commission assessment concluded that the proposed transaction is unlikely to lessen or prevent competition in any market. Additionally, the deal does not raise any public interest concerns.
The finalization of the deal is subject to regulatory approvals and is expected to close in mid-2024. Hogan Lovells is acting as legal counsel to Rolls-Royce on this transaction.
