Kuwait’s sovereign wealth fund is in talks to buy a stake in Rolls-Royce Holdings as one of Britain’s most important industrial groups scrambles to raise billions of pounds of new funding.
Sky News has learnt that the Kuwait Investment Office (KIO), which is part of the Gulf state’s state investment vehicle, is negotiating over a deal as part of a potential £2.5bn cash call.
Sources said on Friday that Rolls-Royce was in talks with the KIO – a London-based arm of the Kuwait Investment Authority – and Singapore’s Government Investment Corporation (GIC).
Rolls-Royce to axe 9,000 jobs
GIC’s interest was reported last week by the Financial Times.
In total, £500m of new shares have been allotted to sovereign wealth investors, meaning the two sovereign funds could acquire stakes worth £250m each, the sources added.
Rolls-Royce, the aircraft engine-maker, has seen its balance sheet battered by the coronavirus pandemic, and has been forced to cut thousands of jobs as it braces for a protracted slump in demand from aviation customers.
The company, headed by chief executive Warren East, is considering launching a rights issue to raise up to £2.5bn as soon as 1 October, insiders said.
Image: Warren East is the company’s chief executive
A Rolls-Royce spokesman said: “We continue to review all funding options to enhance balance sheet resilience and strength.
“Amongst other options, we are evaluating the merits of raising equity of up to £2.5bn, through a variety of structures including a rights issue and potentially other forms of equity issuance.
“No final decisions have been taken as to whether or when to proceed with any of these options or as to the precise amount that may be raised.”
The scale of the share price slump at Rolls-Royce – its valuation has fallen by more than 80% in the last year – means that a £2.5bn cash call would involve the company raising almost its entire market capitalisation by issuing new equity.