Rolls-Royce and Babcock have agreed to sell their minority stakes in AirTanker Holdings to Equitix Investment Management.

AirTanker Holdings owns 14 A330-200 Voyager aircraft, which offer air-to-air refuelling support, air transport and ancillary services for the UK Ministry of Defence.

As agreed, Rolls-Royce will sell a 23.1% shareholding in AirTanker Holdings for £189m, while Babcock will divest a 15.4% stake in the company for a cash consideration of £126m.

The completion of the transactions is subject to regulatory approvals.

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Once complete, both companies will continue to hold 23.5% shareholding each in AirTanker Services.

Other stakeholders in the AirTanker Holdings joint venture (JV) are Airbus and Thales, who had pre-emption rights over the shares being sold.

In separate press statements, Rolls-Royce and Babcock said that they will use the net proceeds to reduce their net debt.

Babcock CEO David Lockwood said: “This is the third disposal we have announced as part of our ongoing programme to streamline the group and, should all complete, ensures we will meet our target of generating at least £400m of disposal proceeds this financial year.”

Rolls-Royce Defence president Tom Bell said: “The sale of our shareholding in AirTanker Holdings is another important step towards achieving our group target to generate at least £2bn from disposals, as announced last year, to help rebuild our group balance sheet in support of our medium-term ambition to return to an investment-grade credit profile.”

Last month, Rolls-Royce North America announced the completion of a $600m modernisation programme at its Indianapolis campus in the US state of Indiana.