Babcock and Rolls-Royce have both announced they are to sell their stakes in AirTanker Holdings, which is an asset joint venture with Airbus and Thales, to Equitix Investment Management Ltd.
A Royal Air Force Airbus A330 MRTT Voyager KC2 ZZ330 tanker transport aircraft.
Image By Renatas Repcinskas / Copyright Shutterstock
Babcock has entered into a definitive agreement with Equitix Investment Management Limited for the sale of its 15.4% shareholding in AirTanker Holdings Limited (AirTanker Holdings) for a cash consideration of £126 million, including the repayment of shareholder loans of £31.1 million, subject to any routine closing adjustments and before transaction costs.
AirTanker Holdings is an asset joint venture with Airbus, Thales and Rolls-Royce, owning 14 A330 Voyager aircraft to support air-to-air refuelling, air transport and ancillary services for UK Ministry of Defence. Babcock retains its 23.5% shareholding in AirTanker Services Limited, which operates these aircraft.
AirTanker Holdings is part of Babcock’s Aviation sector and is accounted for by Babcock as an associate. For the year ended 31st March 2021, Babcock’s share of associate income, included within the Group’s loss, was £(1.1) million2 and AirTanker Holdings had gross assets of £2.7 billion.
The sale is part of Babcock’s ongoing targeted disposal programme, which aims to generate at least £400 million of proceeds. Proceeds from this transaction will be used to reduce net debt.
The deal is expected to complete by the end of this financial year and is subject to regulatory approvals given the industry AirTanker Holdings operates in. There is no merger control condition. Remaining AirTanker shareholders have pre-emption rights over the Babcock shares.
The agreement constitutes a class 2 transaction for the purposes of the UK Financial Conduct Authority’s Listing Rules and as such does not require Babcock shareholders’ approval.
Babcock CEO David Lockwood said: “This the third disposal we have announced as part of our ongoing programme to streamline the Group and, should all complete, ensures we will meet our target of generating at least £400 million of disposal proceeds this financial year. We are pleased to continue to maintain an interest in AirTanker through our work with AirTanker Services.”
Rolls-Royce also announced the agreed sale of its shareholding in AirTanker Holdings Limited (23.1%) to Equitix Investment Management Limited, for cash proceeds of £189 million, including the repayment of shareholder loans and accrued and deferred interest of approximately £47 million, subject to any routine closing adjustments and before transaction costs. The transaction is expected to complete by the end of the first quarter of 2022, subject to regulatory approvals. There is no merger control condition. Proceeds will be used to reduce net debt. Remaining AirTanker shareholders have pre-emption rights over the Rolls-Royce shares and loan notes.
The 14 A330-200 Voyager aircraft are powered by Trent 772B engines, a derivative of the Trent 700 engine. The Voyager aircraft support air-to-air refuelling, air transport and ancillary services for the UK Ministry of Defence. This fleet is operated by AirTanker Services Limited, in which Rolls-Royce will continue to be a 23.5% shareholder. Rolls-Royce will also continue to provide servicing and maintenance for the fleet of Rolls-Royce engines that power the Voyager aircraft to support the Royal Air Force.
Tom Bell, President Rolls-Royce Defence, said: "We are honoured to power the Voyager fleet. Through our continued ownership position in AirTanker Services, the Royal Air Force can rely on us to support its mission critical operations with our Trent 700 derivative engines.
"The sale of our shareholding in AirTanker Holdings is another important step towards achieving our Group target to generate at least £2 billion from disposals, as announced last year, to help rebuild our Group balance sheet in support of our medium-term ambition to return to an investment grade credit profile."