German engineering company Siemens AG announced a deal to acquire US oil-equipment maker Dresser-Rand Group Inc. for $7.6 billion. The Houston-based company is fetching $83 a share, in cash.
Dresser-Rand shares on Friday had shot up 9.4% to close at $79.91.
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 hadn’t made the most of the boom in shale gas extracted by hydraulic fracturing, Bloomberg reported Monday.
“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 hasn’t been as strong.”
While Siemens said it expects to close the transaction by summer 2015, there is leeway for potential competing offers to be placed as the takeover must still be approved by Dresser-Rand shareholders.
GE Talks
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 Sept. 19., citing unidentified people with knowledge of the matter. GE’s representatives couldn’t 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 officer, said in the joint statement.
As 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 ($3.85 billion), the company said today in a separate statement. Siemens and Bosch will each receive from BSH an additional distribution of 250 million euros before the transaction is completed.
Siemens dropped 0.4 percent to 96 euros in Frankfurt trading as of 11:00 a.m., valuing the company at 84 billion euros. Sulzer fell to 124.30 Swiss francs, a decline of 4.5 percent that gave it a market value of about 4.3 billion francs ($4.5 billion).
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 2013 after predecessor Loescher slashed profit targets five times in his six-year tenure.
