Rolls-Royce announced last Tuesday that it has signed an agreement to sell its Energy gas turbine and compressor business to Siemens for a £785 million (US$1.33 billion) cash consideration.

The business being sold supplies aero-derivative gas turbines, compressor systems and related services to customers in the Oil and Gas and Power Generation sectors.

On completion of the transaction, Rolls-Royce will receive a further £200 million for a 25 year licensing agreement, granting Siemens access to relevant Rolls-Royce aero-derivative technology for use in the 4 to 85 megawatt power output gas turbine range.

Rolls-Royce's Energy gas turbine and compressor business has around 2,400 employees. In 2013, it was reported within the results of the Energy business where it contributed £871 million of revenue and £72 million of underlying profit. Siemens' Energy sector has around 83,500 employees and in 2013 contributed revenue of €26.6 billion and underlying profit of €1.9 billion.

John Rishton, Rolls-Royce, CEO, said: “This agreement will give the Energy business greater opportunities as part of a much larger energy company and allows Rolls-Royce to concentrate on the areas of business where we can add most value.”

The transaction excludes certain smaller Power Generation sector assets. On completion of the transaction, Rolls-Royce's shareholding in the Rolls Wood Group (RWG) joint venture, that provides maintenance, repair and overhaul services, will be transferred to Siemens.

The transaction has been approved by the boards of directors of Rolls-Royce and Siemens, and is expected to complete before the end of December 2014, subject to closing conditions, including regulatory approvals.

Siemens, which makes Germany's ICE high-speed trains, is also in a battle presently with GE to acquire the energy division of Alstoms, the French company that makes the high speed Eurostar trains. Neither offer includes the transport (rail) business which would allow Alstom to develop its Transport business as a standalone company, with a strong balance sheet to capitalise on opportunities in the dynamic rail transport market. Alstom has already accepted General Electric's $13 billion offer to buy its power generation and transmission units, but has yet not received government approval.