German industrial conglomerate Siemens AG trumped rival suitors as it struck a $7.6 billion deal to buy Dresser-Rand Group Inc. (DRC), a U.S. oilfield equipment maker, in a bid to strengthen foothold in the flourishing American energy sector.
Dresser-Rand has piqued the interest of other companies as well, including Swiss pump maker Sulzer and General Electric Company (GE), which were reportedly considering a bid for the company. Recently, Siemens had lost out to the U.S. giant in the bidding war for French industrial group Alstom’s energy assets.
Details of the Deal
Per the all-cash deal, Siemens will pay $83 per share of Dresser-Rand, which represents a premium of 37.4% over its closing price of $60.42 on Jul 16, 2014, the day before Siemens’ interest in Dresser-Rand was made public.
The aggregate value of the deal is $7.6 billion, including the assumption of debt. Siemens expects the transaction to conclude by the summer of 2015. The transaction is conditional on Dresser-Rand shareholder approval, regulatory approval in the U.S. and Europe, and other customary closing conditions.
Morgan Stanley (MS) and Zaoui & Co acted as financial advisers to Dresser-Rand.
Siemens’ Rationale
Dresser-Rand stands among the leading suppliers of rotating equipment solutions to the global energy industry. Its portfolio of steam and gas turbines, compressors and engines complements Siemens' offerings in the growing oil and gas and power generation industries.
The American energy sector is thriving as unconventional drilling techniques are being employed to tap new oil and natural gas reserves. Siemens is determined to grab its share of the pie as it expands its exposure to the industry via the Dresser-Rand acquisition. The company can lock profitable, long-term service contracts by supplying equipment to the industry.
Looking Ahead
In its effort to expand its footprint in the lucrative energy sector, the German engineering giant has already splurged $1.3 billion this year as it bought a large chunk of Rolls Royce Holdings plc’s (RYCEY) energy business, which also makes gas turbines and compressors.
Separately, Siemens decided to sell its 50% stake in the BSH Bosch und Siemens Hausgeraete GmbH joint venture to Robert Bosch GmbH for $3.85 billion. The deal is subject to regulatory approval.
Dresser-Rand presently sports a Zacks Rank #3 (Hold).
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