Ashurst jointly advising Rolls-Royce Plc and Babcock Southern Holdings Ltd on sale of their interests

Global law firm Ashurst is jointly advising Rolls-Royce Plc and Babcock Southern Holdings Ltd on the sale of their interests in AirTanker Holdings Limited for a combined cash sum of £315.2 million. The AirTanker business is one of the UK’s largest PPPs, providing the Ministry of Defence with air-to-air refuelling capabilities.

Rolls-Royce and Babcock have entered into conditional, binding documentation to sell their interests in AirTanker Holdings Limited; being 23.1% and 15.4% stakes respectively, to Equitix. Equitix will pay £315.2m in aggregate cash consideration to the sellers assuming the transaction completes by the end of October. The cash consideration includes the acquisition of both Rolls-Royce and Babcock’s existing shareholder loans, which are stapled to the AirTanker Holdings’ shares. The cash consideration is apportioned to the sellers pro rata to their shareholdings.

AirTanker Holdings Limited, is a joint venture between Rolls-Royce, Babcock, Airbus and Thales, which owns 14 A330 Voyager aircraft that support air-to-air refuelling, air transport and ancillary services for the UK Ministry of Defence. This fleet is operated by Air Tanker Services Limited, in which both Rolls-Royce and Babcock shall remain shareholders.

For both Rolls-Royce and Babcock, the sale is an important achievement in pursuance of their respective disposal programmes. Rolls-Royce has announced that it aims to generate £2bn from disposals to help rebuild the Rolls-Royce balance sheet in support of its medium-term ambition to return to an investment grade credit profile. Babcock has announced that it intends to rationalise the Babcock Group’s portfolio through divestments and that it anticipates that this will generate proceeds of at least £400 million.

The sale is conditional on regulatory approvals, including consent from the UK Ministry of Defence and the U.S. Department of State, and the remaining shareholders’ determining to decline their pre-emptive rights. It is expected that the transaction will complete before the end of 2021.

The Ashurst team is being led by partners Jason Radford and Karen Davies with support from senior associate Molly Woods and associates Jasmin O’Reilly and Lucy Deakin. Projects partners Philip Vernon and Patrick Boyle, senior associates Mark Emmanuel, Caitlin Cook, Laura Birkinshaw-Miller and Lindsey Bouchara and associates Luiza Wojciszke, Heather Shand, Alice Rosenshaw and Wilson Lu also advised. Competition advice was provided by partner Steven Vaz and senior associate Edward McNeill. Counsel Don McCombie advised on IP and senior consultant Nicholas Stretch and senior associate Rebecca Servian advised on incentives.

Partner and Chair of Ashurst, Karen Davies, commented: “It was a pleasure to advise Babcock and Rolls-Royce on this transaction. We were happy to be able to assist both clients in this strategic transaction, which in each case marks an achievement for their respective disposal programmes.”

Partner Jason Radford, added: “It has been a pleasure leading the Ashurst team on such a strategically important deal for both Babcock and Rolls Royce. To be able to reach this stage with Equitix has been the culmination of a considerable team effort with both Babcock and Rolls Royce and their advisory team. A true collective effort.”

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