Alex Webb, Aaron Kirchfeld and Sheenagh Matthews Munich and London
SIEMENS has agreed to buy Dresser-Rand Group for $7.6 billion (R84bn) including debt as Europe’s largest engineering company expands its business with oil-and-gas equipment in the US.
Siemens would pay $83 a share in cash, the Munich-based company said in a statement yesterday. That’s a premium of about 37 percent to Dresser-Rand’s share price in July before reports about a potential bid boosted the stock.
Siemens has coveted Dresser-Rand, which makes compressors and turbines for the oil and gas industry, for at least three years.
Siemens chief executive Joe Kaeser is seeking more deals in that industry after saying that the German engineering company had not made the most of the boom in shale gas extracted by hydraulic fracturing.
“The valuation is a stretch, but strategically it makes sense,” said Volker Stoll, an analyst at Landesbank Baden-Wuerttemberg, who has a hold rating on the stock. “With the deal, the energy business will be strengthened, especially in the US where Siemens has not been as strong.”
Sulzer, which said last week that it was in non-exclusive talks with Dresser-Rand, said yesterday that it had terminated the negotiations to focus on other merger and acquisition opportunities.
While Siemens said it expected to close the transaction next year, there was leeway for potential competing offers to be placed as the takeover still had to be approved by Dresser-Rand shareholders.
General Electric (GE) had also been in talks with Dresser-Rand and was weighing whether to make an offer, the Financial Times reported on Friday, citing unidentified people with knowledge of the matter.
GE’s representatives could not immediately be reached for comment.
“This is a transaction that should create value for clients, as well as for both sets of shareholders, that would not have been achieved had Dresser-Rand not become part of the Siemens group,” Vincent Volpe Jr, Dresser-Rand’s chief executive, said in the joint statement.
As Kaeser is overhauling Siemens, he had also agreed to sell its 50 percent stake in the BSH Bosch and Siemens Hausgeraete joint venture to Robert Bosch for e3bn (R42bn), the company said on Sunday.
Siemens and Bosch will each receive from BSH an additional distribution of e250 million before the transaction is completed.
The deal with Dresser-Rand allows Siemens to prevail against its former chief executive Peter Loescher, who is now chairman of Sulzer. Kaeser became chief executive in August 2013 after predecessor Loescher slashed profit targets five times in his six-year tenure.
Siemens had first cultivated its interest in Dresser-Rand under Loescher’s leadership.
“Dresser-Rand is a perfect fit for the Siemens portfolio,” Kaeser said. – Bloomberg