Rolls-Royce has launched a strategic review of L’Orange, a German arm of the group that makes fuel injectors for diesel engines.
The announcement from the aircraft engine maker comes after reports surfaced last week suggesting that L’Orange was to be sold for $700 million.
“Rolls-Royce notes the recent media speculation and confirms that it is reviewing its strategic options for L’Orange.
“Irrespective of the outcome of this review, Rolls-Royce intends to maintain close ties to L’Orange, either as an owner or as a key customer,” the company said on Monday.
Based in Stuttgart, L’Orange specialises in injection technology for diesel and heavy fuel oil engines in the “off-highway sector”, which Rolls says makes it possible to combine low pollution emissions with low fuel consumption.
If it goes through, the sale would be the largest divestment since boss Warren East took the top job in 2015.
The strategic review has no impact on the remainder of the Rolls-Royce Power Systems business, the group confirmed, and any decision about the future of L’Orange is subject to the approval of the supervisory board.
In August, Rolls-Royce took a step forward in its recovery after a jump in large engine deliveries helped the firm swing to a half-year profit.
The firm booked a pre-tax profit of £1.94 billion for the six months ending in June, up from a £2.15 billion loss over the same period last year.
Revenues climbed 12% to £7.57 billion, as the FTSE 100 firm cheered a 27% rise in large engine deliveries in the civil aerospace sector.
The company has been looking to shore up its performance after reporting its largest ever loss and one of the biggest in UK corporate history last year.
Rolls slumped to a pre-tax loss of £4.64 billion for 2016 after a £4.4 billion writedown linked to the collapse of the Brexit hit pound, as well as a £671 million penalty to settle bribery allegations.