Published : Sept. 22, 2014 - 20:16
Siemens AG agreed to buy Dresser-Rand Group Inc. for $7.6 billion including debt as Europe’s largest engineering company is expanding its business with oil-and-gas equipment in the U.S.
Siemens will pay $83 a share in cash, the Munich-based company said in a statement Monday. Dresser-Rand shares surged 9.4 percent to $79.91 on Sept. 19 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 hadn’t made the most of the boom in shale gas extracted by hydraulic fracturing.
Dresser-Rand was working with Morgan Stanley to prepare for possible takeover bids from companies including Siemens, people with knowledge of the matter said last month. Sulzer said last week it was in non-exclusive talks with Dresser-Rand.
General Electric Co. 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.
A visitor inspects home appliances, manufactured by Siemens AG, at the company’s trade stand at the IFA Consumer Electronics Fair in Berlin on Sept. 3. (Bloomberg)
The agreement with Dresser-Rand allows Siemens to prevail against its former Siemens Chief Executive 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.
Siemens had first cultivated its interest in Dresser-Rand under Loescher’s leadership. The Austrian was appointed Sulzer chairman earlier this year after becoming chief executive of Renova Management AG, a holding company for Viktor Vekselberg, Sulzer’s biggest shareholder.
Renova said last week it holds 4.99 percent in Dresser-Rand. Renova spokesman Rolf Schatzmann declined to comment on when the company bought the stake.
Siemens has already spent $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.
As more facilities spring up across the U.S. to extract, transport and store shale oil and gas produced from hydraulic fracturing, or fracking, Siemens must keep up to expand its own offering, Kaeser said at the time. Supplying more equipment would give the company a lock on lucrative, long-term service contracts, he said.
Growing energy needs and a boom in unconventional oil make Dresser-Rand’s compressors and turbines ― which are used to extract, move and process oil and gas ― attractive to rivals and larger industrial conglomerates. Dresser-Rand, which has the largest installed base of compressors serving the energy industry, has been seen as a takeover candidate for more than year.
GE, Cameron International Corp. and National Oilwell Varco Inc. could be other potential buyers of Dresser-Rand, analysts have previously said. (Bloomberg)