Siemens AG agreed to buy Dresser-Rand Group Inc for US$7.6 billion including debt as Europe’s largest engineering company expands its business with oil and gas equipment in the US.
Siemens will pay US$83 a share in cash, the Munich-based company said in a statement yesterday.
Dresser-Rand shares surged 9.4 percent to US$79.91 on Friday after people familiar with the matter said that Siemens was preparing a bid.
The agreement scuppers a competing plan by Switzerland’s Sulzer AG to merge with Dresser-Rand.
Siemens has coveted Dresser-Rand, which makes compressors and turbines for the oil and gas industry, for at least three years.
Siemens chief executive officer 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, a Stuttgart-based 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,” he said.
Sulzer, which last week said it was in non-exclusive talks with Dresser-Rand, yesterday said it terminated the negotiations to focus on other M&A opportunities. General Electric Co (GE) has also been in talks with Dresser-Rand and is 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,” Dresser-Rand chief executive officer Vincent Volpe said in the joint statement.
While Kaeser is overhauling Siemens, he also agreed to sell its 50 percent stake in the BSH Bosch und Siemens Hausgeraete GmbH joint venture to Robert Bosch GmbH for 3 billion euros (US$3.85 billion), the company said yesterday in a separate statement.
Siemens and Bosch will each receive from BSH an additional distribution of 250 million euros before the transaction is completed.
The agreement with Dresser-Rand allows Siemens to prevail against its former chief executive officer Peter Loescher, who is now chairman of Sulzer. Kaeser became CEO in August last year 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.
The Austrian was appointed Sulzer chairman earlier this year after becoming Renova Management AG chief executive, a holding company for Viktor Vekselberg, Sulzer’s biggest shareholder.
“Dresser-Rand is a perfect fit for the Siemens portfolio,” Kaeser said in the statement.
Siemens has already spent US$1.3 billion this year buying most of Rolls-Royce Holdings Plc’s energy business, which also makes gas turbines and compressors.
Kaeser told Bloomberg News in a July interview he had “firepower” for takeovers, after he unsuccessfully tried to compete with GE for Alstom SA’s gas turbines business.
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