DEUTZ AG has signed an agreement to sell its gas engines and diesel engines business for decentralised power generation (DEUTZ Power Systems) to 3i. The agreed purchase price is EUR360 million. The transaction is expected to close by the end of the third quarter. The sale is subject to approval by the Supervisory Board of DEUTZ AG and the antitrust authorities.

DEUTZ Power Systems is a world leading provider of efficient and environmentally-friendly decentralised power generation systems, primarily based on gas engines. DEUTZ Power Systems gensets convert both natural and non-natural gases into electricity, heat and cooling. The division has special expertise in applications using non-natural gases, such as biogas and landfill gas. It also provides sophisticated combined heat and power (CHP) solutions. The overlap between DEUTZ Power Systems and the Compact Engines business of DEUTZ AG is limited as business processes, customer demands and market characteristics differ. Gordon Riske, CEO of DEUTZ AG commented: "Following a detailed strategic review, the Management Board and Supervisory Board have concluded that we cannot exploit the full potential of the compact engines business as well as the medium and large sized stationary gas engines business in parallel. However, both businesses have great prospects for further profitable growth."

"We certainly regret that we will no longer be a part of DEUTZ," commented Peter Schwab, chairman of the works council at DEUTZ Power Systems GmbH & Co. KG in Mannheim, "however, we believe that the solution reached provides the company with good prospects for growth and will secure jobs going forward. In particular, we have been able to extend the agreement on job security until the end of 2011. This agreement was due to end in 2007. The exclusion of operational redundancies and a firm commitment to investments by the new owner address the interests of the workforce appropriately."

3i plans to work together with the company's management to continue its present growth strategy based on its outstanding technological expertise and strong competitive position in the growing global market for decentralised power generation. "With its global network, 3i is the ideal partner to support the international expansion of this business", stressed Peter Wirtz, a director at 3i Deutschland.

Following the sale of DEUTZ Power Systems, DEUTZ will focus on its core competence: the development and production of compact diesel engines.