Rolls-Royce Regulatory News (RR.)

11 July 2016

ROLLS-ROYCE HOLDINGS PLC

ACQUISITION OF OUTSTANDING STAKE IN ITP FROM SENER

Rolls-Royce Holdings plc announces that it will purchase the outstanding 53.1% shareholding in Industria de Turbo Propulsores SA ("ITP") owned by SENER Grupo de Ingeniería SA ("SENER"). The acquisition strengthens Rolls-Royce's position on its Civil Aerospace large engine growth programmes by capturing significant additional value from its long-term aftermarket revenues, including the high volume Trent 1000 and Trent XWB engines, where ITP has played a key role as a risk and revenue sharing partner. It also enhances the group's manufacturing and services capabilities and adds value to the Defence Aerospace business, particularly on the TP400 and EJ200 programmes.

Rolls-Royce will pay SENER a total consideration of EUR 720m, subject to due diligence, for the outstanding 53.1% of ITP. This follows a decision by SENER to exercise its put option. Under the existing shareholder agreement, consideration will be settled over a two year period following completion in eight equal, evenly spaced instalments. The agreement allows flexibility to settle up to 50% of the consideration in the form of Rolls-Royce shares. Final consideration as to whether the payments will be settled in cash, or cash and shares will be determined by Rolls-Royce during the payment period. Completion, which is subject to regulatory clearances, is expected in early 2017.

Warren East, Rolls-Royce, CEO, said: "We welcome the opportunity to acquire the outstanding stake in ITP. ITP has been a trusted partner for Rolls-Royce over many years as well as working for other engine manufacturers. This investment will add to our aerospace capability, with excellent facilities, services and products, to generate additional opportunities for profitable growth. We look forward to forging a closer and more productive future together, and to welcoming ITP's employees into Rolls-Royce. I would like to thank SENER for their close relationship over three decades as we have built this exceptional business."

Jorge Sendagorta, SENER, President, stated: "We inspired the creation of ITP in 1989 and, over the years, supported the extraordinary management and professionals of the company with a focused long-term investment strategy based on best-in-class technology and production. We are extremely proud of the great achievements of ITP, but our mission is now complete and the time has come when it is Rolls-Royce who can build the best future for the company. SENER will now concentrate on the expansion of our core engineering business, dedicating more resources to our ambitious international strategy and to R&D. Thank you Rolls-Royce and ITP for these three decades of fruitful creation together."

ITP is a global company which designs and manufactures aero engine components for a range of customers. It has partnered with Rolls-Royce on all Trent programmes, manufacturing Low Pressure turbines, and is currently researching alongside Rolls-Royce new Intermediate Pressure turbine technology for the next generation UltraFan™ engine. It has research and development expertise, particularly in the field of aerospace super-alloys, and engine maintenance capabilities. ITP is headquartered in Bilbao, Spain, and employs over 3,000 people in facilities in Spain, Mexico, India, Malta, US and the UK.

ITP's 2015 revenues were EUR 710m, EBITDA was EUR 116m and profit after tax was EUR 59m. Gross assets as at 31 December 2015 were EUR 1.7bn.

Ignacio Mataix, ITP, CEO added: "I am delighted that we are joining the Rolls-Royce family. We have already worked together to create outstanding aerospace products and services which will generate long term value. The acquisition will create new growth opportunities, while maintaining our current portfolio and strengthening our global position. I am sure it will provide significant opportunities for our employees across the business."

This announcement has been determined to contain inside information.

Rolls-Royce will report its results for the six months to 30 June 2016 on 28 July 2016.

About Rolls-Royce Holdings plc

1. Rolls-Royce's vision is to be the market-leader in high performance power systems where our engineering expertise, global reach and deep industry knowledge deliver outstanding customer relationships and solutions. We operate across five businesses: Civil Aerospace, Defence Aerospace, Marine, Nuclear and Power Systems.

2. Rolls-Royce has customers in more than 120 countries, comprising more than 400 airlines and leasing customers, 160 armed forces, 4,000 marine customers including 70 navies, and more than 5,000 power and nuclear customers.

3. We have three common themes across all our businesses:

· Investing in and developing engineering excellence

· Driving a manufacturing and supply chain transformation which will embed operational excellence in lean, lower-cost facilities and processes

· Leveraging our installed base, product knowledge and engineering capabilities to provide customers with outstanding service through which we can capture aftermarket value long into the future.

4. Annual underlying revenue was £13.4 billion in 2015, around half of which came from the provision of aftermarket services. The firm and announced order book stood at £76.4 billion at the end of 2015.

5. In 2015, Rolls-Royce invested £1.2 billion on research and development. We also support a global network of 31 University Technology Centres, which position Rolls-Royce engineers at the forefront of scientific research.

6. Rolls-Royce employs over 50,000 people in more than 46 countries. Nearly 15,700 of these are engineers.

7. The Group has a strong commitment to apprentice and graduate recruitment and to further developing employee skills. In 2015 we employed 228 graduates and 277 apprentices through our worldwide training programmes.

About SENER Grupo de Ingeniería SA

SENER is a private engineering and technology group founded in 1956. It seeks to offer its clients the most advanced technological solutions and enjoys international recognition, thanks to its independence and its commitment to innovation and quality. SENER has a workforce of close to 6,000 professionals at its facilities in Algeria, Argentina, Brazil, Chile, China, Colombia, Japan, Morocco, Mexico, Poland, Portugal, South Korea, South Africa, Spain, the United Arab Emirates, the United Kingdom and the United States. The group’s turnover exceeds €1.376 billion (2015 data).

SENER engages in the specific activities of Engineering and Construction. It also has industrial holdings in companies involved in Aeronautics, as well as in Energy and Environment. SENER’s Engineering and Construction division has become one of the world’s benchmark companies in the Aerospace, Infrastructures and Transport, Power, Oil & Gas, and Marine sectors.

In 2016, SENER will be celebrating its 60t anniversary with a long track record of projects, international experience and a team comprised of thousands of professionals who are the co-creators of the innovations that have marked its past and will shape its future.

About Industria de Turbo Propulsores SA

ITP is the ninth largest aircraft engine and components company in the world by revenue. The company has production centres in Spain, United Kingdom, Mexico, the United States, Malta and India with over 3,000 employees.

ITP includes among its activities the design, research and development, manufacturing and casting, assembly and testing of aeronautical engines. It also provides MRO services for a wide range of engines for regional airlines, business aviation, helicopters, industrial and defence applications.

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