Rolls-Royce has launched a strategic review of L’Orange, the German division of its business that manufactures fuel injectors for diesel engines.
The announcement follows reports surfaced last week suggesting L’Orange was to be sold for $700m.
“Rolls-Royce notes the recent media speculation and confirms that it is reviewing its strategic options for L’Orange.
“Irrespective of the outcome of this review, Rolls-Royce intends to maintain close ties to L’Orange, either as an owner or as a key customer,” the company said in a statement to the London Stock Exchange today.
If, at some point, a deal is reached, the sale would be the largest divestment since Warren East took over the CEO role at Rolls Royce in 2015.
The strategic review has no impact on the remainder of the Rolls-Royce Power Systems business, the group confirmed, and any decision about the future of L’Orange is subject to the approval of the supervisory board.
In August, Rolls-Royce took a step forward in its recovery after a jump in large engine deliveries helped the firm swing to a half-year profit.
The firm revealed a pre-tax profit of £1.94bn for the six months ending in June, up from a £2.15bn loss over the same period the previous year.
The company has been looking to shore up its performance after reporting its largest ever loss and one of the biggest in UK corporate history.
Rolls slumped to a pre-tax loss of £4.64bn for 2016 after a £4.4bn write-down linked to the collapse of the Brexit hit pound, as well as a £671m penalty charge.
In mid-morning trading, Rolls-Royce shares slipped 0.39% to 857.40.
While brokers had been viewing Rolls Royce as a ‘sell’ or ‘strong sell’ in the final quarter of 2017, the consensus is now split evenly between ‘strong buy’, ‘sell’ and ‘neutral’.