The sale of L’Orange - a subsidiary of Rolls-Royce Power Systems - has been backed by the boards of both companies and is expected to be sealed by the end of the second quarter, 2018.
The move will help “improve the resilience” of the balance sheet and stump up extra capital “to pursue opportunities that will drive greater returns”, Rolls-Royce said.
L’Orange employs around 1,000 staff and is based in Stuttgart, Germany, with operations in the US and China.
It makes fuel injection products for areas such as marine power and propulsion systems and special-application vehicles. The operation secured sales of 244 million euros (£212 million) last year.
Rolls-Royce chief executive Warren East said: “This transaction builds on the actions we have taken over the last two years to simplify our business.
“The divestiture of L’Orange enables Rolls-Royce Power Systems to focus on other long-term, high growth opportunities and our company to allocate our capital to core technologies and businesses that drive greater returns for the group.”
Colorado-based Woodward designs and manufactures control systems and components for the aerospace and industrial sectors.
If it wins the backing of regulators, the combined firm will be named Woodward L’Orange and will join Woodward’s industrial unit.
Andreas Schell, president and chief executive of Rolls-Royce Power Systems, said: “Rolls-Royce Power Systems will remain a key customer of Woodward L’Orange.
“We have enjoyed working with L’Orange who have a leading position in their markets, excellent technology, a skilled workforce and strong leadership. We wish them well as they join the Woodward organisation.”
Rolls-Royce, which has 50,000 staff across 50 countries, announced a return to profit in March. It recorded a pre-tax surplus of £4.9 billion for 2017, thanks to a £2.6 billion accounting boost from the strengthening of the Brexit-hit pound.
This marked a recovery from a dire 2016, when it fell into the red by £4.6 billion in what was its largest ever loss and one of the biggest in UK corporate history, after being knocked by the pound’s plunge and a corruption scandal.
On an underlying basis, Rolls saw annual pre-tax profits rise 25% to £1.1 billion in 2017.