Siemens makes $7.6bn Dresser-Rand bet

November 2014 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Siemens AG entered into a definitive agreement to acquire US oilfield equipment manufacturer Dresser-Rand Group Inc in September. Under the terms of the deal Siemens will pay $7.6bn for the company including the assumption of outstanding debt. The deal for Dresser-Rand will considerably improve Siemens’ standing in the US shale oil and gas sector, which the company feels will be a core area of focus going forward.

The deal for Dresser-Rand will see the company’s shareholders receive $83 per share for their stake. The agreed price represents a premium of 37.4 percent over Dresser-Rand’s closing share price of $60.42 on 16 July, the day before speculation appeared in the press regarding interest in the company. In order to sweeten the deal, German conglomerate Siemens has also agreed to pay shareholders an additional 55 cents per share, applied on the first day of each month starting 1 March 2015 until the deal closes. Both Siemens and Dresser-Rand expect the acquisition to close by summer 2015, subject to customary closing conditions, the approval of Dresser-Rand’s shareholders and regulatory approval in the US, Europe and a number of other jurisdictions. The necessity of approval from Dresser-Rands’ shareholders does open the door for potential competing offers to be registered. Indeed, it is believed that General Electric has retained an interest in Dresser-Rand. Sulzer, the Swiss pump maker, confirmed in early September that it was in talks with the company about a potential deal. However, despite the interest of other parties, at the time of writing no competing offers have surfaced.

In a joint statement announcing the sale, Siemens, which has a market value of nearly $85bn, revealed that it intends to operate Dresser-Rand as the company’s separate oil and gas business. As per the agreement, Dresser-Rand will continue to operate under its existing brand name and will retain its current executive leadership team. “After a thorough and competitive process, we are pleased to have reached this agreement with Siemens as it maximises value and delivers significant benefits to all Dresser-Rand stakeholders,” said Vincent R. Volpe Jr., Dresser-Rand’s president and chief executive. “Dresser-Rand shareholders will receive immediate and certain all-cash consideration for their shares at an attractive premium to the Company’s unaffected share price.”

It is believed that Siemens has been interested in acquiring Dresser-Rand for a number of years. Joe Kaeser, the company’s president and chief executive, has prioritised Siemens’ standing in the shale space. While there has been a belief within Siemens that the company has not done enough to capitalise on the US shale gas boom, steps are now being taken. In May, Mr Kaeser hired Lisa Davis from Royal Dutch Shell to lead the company’s energy business. “As the premium brand in the global energy infrastructure markets, Dresser-Rand is a perfect fit for the Siemens portfolio,” said Mr Kaeser in a statement. “The combined activities will create a world-class provider for the growing oil and gas markets. With this Dresser-Rand will become ‘The oil and gas’ company within Siemens and fit right into our Siemens Vision 2020.”

Mr Kaeser has undertaken a process of revitalising Siemens’ wider business. In September the company also agreed to sell its 50 percent stake in the BSH Bosch und Siemens Hausgeraete GmbH joint venture to Robert Bosch GmbH for $3.85bn. Both Siemens and Bosch will receive an additional €250m from BSH before the transaction is completed. Furthermore, earlier in 2014 Siemens acquired the bulk of Rolls-Royce Holdings Plc’s energy business, which makes gas turbines and compressors for around $1.3bn.

However, on 29 September the Shareholders Foundation announced that a Dresser-Rand investor had filed a lawsuit in order to put a stop to the transaction. According to the investor, who had purchased stock in the company before the deal was announced on 21 September, the Siemens offer wholly undervalued Dresser-Rand.

Richard Summerfield