UK technology giant Rolls-Royce is considering selling a part of its energy business to Siemens.
In a statement on its website, Rolls-Royce said it is currently negotiating with the German engineering group regarding the sale of a unit manufacturing aero-derivative gas turbines and compressor systems and providing related services to customers in the oil, gas and power generation industry.
According to sources familiar with the negotiation, Siemens is ready to pay about £0.8bn for the business, as part of its new strategy that also saw the company entering the talks about the future of struggling French engineering group Alstom.
Siemens said earlier this week, it will place an alternative offer to buy Alstom’s power business, previously eyed by US conglomerate General Electric.
Rolls-Royce's energy and nuclear business had revenue of £1.54bn in 2013, the company said on its website. Excluding nuclear, which is not part of the negotiations, the unit had revenue of about £940m.
"We've always felt that (the unit) would be better suited elsewhere as it appears sub-scale against larger competitors like GE, Mitsui and Siemens," RBC Capital Markets analyst Robert Stallard wrote in a note to clients, adding that he expected news of the potential deal to be well received.
"We wouldn't be surprised to see some future agreement include a provision for Rolls to keep injecting technology into a Siemens-owned business."
Sources said the talks between Rolls-Royce and Siemens had been going on long before the Alstom deal cropped up.