FRANKFURT: Germany’s Siemens has agreed to buy US oilfield equipment maker Dresser-Rand for $7.6bn in cash, aiming to catch up with arch-rival General Electric in a booming US shale gas market.
The acquisition, which ranks among the biggest in the history of the German industrial group, will strengthen Siemens’ position in the United States, 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 GE, while reducing its exposure to more cyclical consumer businesses where it has had limited success.
“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,” DZ Bank analyst Jasko Terzic wrote in a research note.
Siemens’ US energy business made €3.7bn of revenues in its last fiscal year, compared with the roughly $20bn generated by GE’s US operations in oil and gas alone.
Terzic said the deal put 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.
Reuters
