Siemens extends ‘Vision’ with deal for Rand

The acquisition, which ranks among the biggest in the history of the industrial group, will strengthen Siemens’ position in the US, its weakest region, and focus the group more tightly on its industrial customers.

Siemens embarked on a corporate overhaul in May dubbed “Vision 2020”, seeking to make up ground on more profitable competitors such as Switzerland’s ABB as well as US-based General Electric, while reducing its exposure to more cyclical consumer businesses where it has had limited success.

As part of that drive, the group has also agreed to sell its stake in household appliances joint venture BSH to partner Robert Bosch, bringing in £2.36bn to help finance the Dresser-Rand deal.

“The Dresser-Rand offer is high but can be justified in our view due to the very good fit into Siemens target to strengthen the US and oil & gas business,” said DZ Bank analyst Jasko Terzic.

Terzic said the deal puts Dresser-Rand’s enterprise value (equity plus debt) at about 16 times earnings before interest, tax, depreciation and amortisation (EBITDA), compared with around 8.5 times EBITDA for peers.

Siemens has long coveted Dresser-Rand, but shrank in the past from making a formal bid, balking at its high valuation.

The German group appears to have been spurred into action by Swiss pump maker Sulzer AG, which had proposed an all-stock merger with Dresser-Rand.

Sulzer said yesterday it had ended its talks with Dresser-Rand, but some analysts said there was still a chance of a rival emerging to challenge Siemens’ offer.

One source said that while GE had made contact with Dresser-Rand, it was unlikely to pursue a bid.

Siemens lost out to GE in a bidding war for the energy business of France’s Alstom in June.

Siemens said its bid was unanimously supported by Dresser-Rand’s board of directors.

“As the premium brand in the global energy infrastructure markets, Dresser-Rand is a perfect fit for the Siemens portfolio,” said Siemens’ chief executive Joe Kaeser.

A booming US shale gas market has driven a surge in investment by energy companies, creating demand for the compressors and turbines made by companies such as Dresser-Rand.

Annual capital expenditure on oil, gas and coal has more than doubled in real terms since 2000.

The Dresser-Rand deal will eclipse Siemens’ acquisitions of recent years. It bought Dade Behring for £4.3bn in 2007 under Kaeser’s predecessor Peter Loescher – now the chairman of Sulzer – in a deal that was widely criticised as overpriced.