Rolls-Royce sub business to be nationalized
British media reported on Monday that the government of Prime Minister David Cameron will consider nationalizing a crucial section of Rolls-Royce's submarine business.
The government’s nationalization plan will target Rolls-Royce's business which makes the power systems used in the country's nuclear submarines, reported the Financial Times.
The FT added that the government could also decide to merge some or all of Rolls-Royce's businesses with Britain's biggest defence company BAE Systems.
Rolls-Royce has been subject to takeover speculation after its share price fell 30 percent over the last year. This followed a series of profit warnings related to a slow-down in its marine engine division and problems in the part of its aero-engine business which services older planes.
The British government holds a "golden share" in Rolls-Royce which means certain deals need its consent, while foreign ownership of Rolls-Royce is limited to 15 percent as part of rules drawn up when it was privatised in 1987, reported the FT.
But the contingency plans for the company suggested the government is uneasy about its situation which plays an important role in the country's defence programme.
The FT said officials at Prime Minister David Cameron's office were concerned that Rolls-Royce's management had no substantial experience of defending itself in the event of a hostile takeover bid.
Rolls-Royce, alongside BAE Systems, is a major contractor on a plan to replace Britain's ageing fleet of four submarines which carry the country's Trident nuclear deterrent. Known as the Trident Successor project, it has an estimated cost of 31 billion pounds ($47 billion), making it one of the government's largest investments.
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