Siemens CEO Joe Kaeser is calling for a 2014 operating profit margin of 9.5 to 10.5 per cent, three months after the company offered guidance of 12 per cent.Michael Sohn/The Associated Press
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 today. Dresser-Rand shares surged 9.4 per cent to $79.91 on Sept. 19 after people familiar with the matter said that Siemens is preparing a bid. The agreement with Siemens 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 is 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 is in non-exclusive talks with Dresser-Rand about a potential merger.
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.
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' Interest 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 per cent 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.
Expanding Facilities 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.