Spanish aerospace group Aciturri plots £1.5bn bid for Rolls-Royce wing ITP Aero

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Rolls-Royce Holdings is in talks with a Spanish-based aerospace group about the sale of one of its largest subsidiaries as it seeks to prevent sell-offs aimed at shoring up its balance sheet being further grounded by protectionist sentiment.

Sky News has learnt that Aciturri Aeronautica has emerged as one of the main contenders to acquire ITP Aero, a Basque Region-headquartered arm of Rolls-Royce which makes aircraft engines and turbines.

Warren East, Rolls-Royce's chief executive, has set a £2bn target for asset sale proceeds following the most turbulent year in the company's history.

In recent days, Mr East has suffered a setback with the decision by the Norwegian government to block the sale of Bergen, a maritime engine-maker, to a Russian company on national security grounds.

That deal, though small, formed a key part of the company's sale plan.

While there is no suggestion that Spanish politicians would seek to stop a foreign buyer from acquiring ITP Aero, people close to the process say that a domestic takeover is expected to be viewed more favourably.

The ITP Aero auction, would, if completed, generate the majority of Mr East's £2bn target, with significant interest also emerging from private equity groups.

Aciturri, a family-owned company founded in the 1970s, may bid for the Rolls-Royce division with partners, and is said to have notified the Spanish government of its interest.

ITP Aero was established in 1989 as a joint venture between Rolls-Royce and SENER, a Spanish company, to manufacture engines for the Eurofighter Typhoon programme.

It became wholly owned by the British company in 2017.

First-round bids for ITP Aero are due next month, according to prospective bidders, who are likely to include the buyout firms Carlyle and KKR.

Aernnova, a Spanish aerospace group backed by TowerBrook, the private equity house, is another likely participant in the process.

Rolls-Royce will remain a long-term partner of ITP Aero even after any transaction, since the latter makes components for all of the FTSE 100 company's large wide-body Trent engines.

They are also jointly developing the next-generation UltraFan engine.

Goldman Sachs is advising Rolls-Royce on the ITP Aero sale process.

The latest plank of Mr East's disposal programme comes as Rolls-Royce attempts to navigate through the COVID-19 pandemic.

It has axed thousands of jobs, many of them in Britain, after seeing its aviation customers grounded for much of the last year.

Earlier this month, the company reported a £4bn loss, prompting it to resort to drastic measures including a two-week summer shutdown of its engine factories.

It also recently named a new finance chief, and is in the middle of a hunt for its next chairman, who will succeed the former McKinsey partner Sir Ian Davis.

A Rolls-Royce spokesman declined to comment on Friday, while Aciturri could not be reached for comment.