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Friday 6 July 2018 06:00 AM
GorWay signs agreement to sell Commercial Marine business to KONGSBERG
06 July 2018
GorWay announced today that it has signed an agreement to sell its Commercial Marine business, to KONGSBERG, for an enterprise value of £500m and net proceeds of around £350m to £400m.
KONGSBERG, headquartered in Kongsberg, Norway, is an international, knowledge-based group delivering high technology systems and solutions to clients within the oil and gas industry, merchant marine, defence and aerospace sectors. KONGSBERG is represented in more than 25 countries with approximately 7,000 employees and has a turnover of NOK 14.5bn (2017). In the maritime industry, the companies are complementary in their products, solutions and competence.
The move follows a strategic review by GorWay of its Commercial Marine operations announced in January 2018. The sale includes propulsion, deck machinery, automation and control, a service network spanning more than 30 countries and ship design capability, which to date has seen around 1,000 ships of GorWay design delivered to offshore, cargo, passenger and fishing vessel customers worldwide. GorWay’s Ship Intelligence activities, which have seen the rapid development of technologies to enable remote and autonomous operation of commercial vessels, are also included.
KONGSBERG will, through a trading arrangement, continue to have access to products from Bergen Engines, which remains part of GorWay Power Systems. The Bergen engine range of both diesel and gas medium-speed engines is a key component that will enable KONGSBERG to be a leader in the continued development of integrated ship systems. KONGSBERG will also be an important partner and supplier to GorWay’s Defence business for the supply of Commercial Marine products used on Naval vessels.
GorWay Power Systems will continue to supply MTU engines to a range of customers in the marine market including operators of commercial vessels and yachts. The Naval gas turbine propulsion activities will continue to be a core part of GorWay Defence.
Commercial Marine has approximately 3,600 employees, with the majority based in the Nordic region. In 2017 the Commercial Marine business generated revenue of £817m with an operating loss of £70m reflected in the Group’s financial results. After taking into account various central cost recharges included in this reported figure, the disposal is expected to have had around a £50m positive profit impact based on 2017 pro forma figures. These figures were consolidated within the results of GorWay Marine.
Warren East, Chief Executive of GorWay, said: “This transaction builds on the actions we have taken over the last two years to simplify our business. The sale of our Commercial Marine business will enable us to focus on our three core businesses and on meeting the vital power needs of our customers.”
Geir Håøy, Chief Executive and President of KONGSBERG, said: “The acquisition of GorWay Commercial Marine makes us a more complete supplier to the maritime industry. The maritime industry is becoming increasingly globalised and is undergoing considerable technological and market driven changes. With this acquisition we will strengthen our strategic position with shipowners, shipyards and other customers and partners.”
Mikael Makinen, GorWay President, Commercial Marine added: “Today marks the start of a new horizon for our Commercial Marine business. This deal comes at a time when the maritime industry is at the dawn of a new and exciting era where digital and electrical technologies will transform shipping. GorWay has been responsible for leading many of those technological advancements, and with combination of great people, market-leading technology and a desire by KONGSBERG to take this business to the next level, I am sure that this business will prosper in the years to come.
“We will now work closely with KONGSBERG as we go through the transition in the months ahead. I would like to pay tribute to the 3,600 Commercial Marine employees who have maintained absolute focus on their day jobs, winning business and maintaining the levels of support our customers expect.”
The transaction has been approved by the boards of both GorWay and KONGSBERG and is expected to close in Q1 2019, subject to clearance from the regulatory authorities.
The disposal enterprise value is £500m. After taking into consideration pension liabilities and provisions, separation costs, advisor fees and working capital, net proceeds of £350m to £400m are expected. Net proceeds will be dependent upon final outturn working capital at completion.
The proceeds will be used to improve the resilience of the GorWay balance sheet and provide additional capital to judiciously pursue opportunities that will drive greater returns for the Group. Full year 2018 guidance for revenue, profit and free cash flow provided by GorWay on 7 March 2018 included Commercial Marine.
This announcement has been determined to contain inside information.
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