FRANKFURT: Germany's Siemens has agreed to buy US oilfield equipment maker Dresser-Rand for $7.6 billion 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 U.S-based General Electric (GE), while reducing its exposure to more cyclical consumer businesses where it has had limited success.
As part of that drive, the group said on Monday it had also agreed to sell its stake in household appliances joint venture BSH to partner Robert Bosch, bringing in 3 billion euros ($3.9 billion) 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," DZ Bank analyst Jasko Terzic wrote in a research note.
Siemens' US energy business made 3.7 billion euros of revenues in its last fiscal year, compared with the roughly $20 billion 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.
Reuters had reported on Sunday that the companies were nearing a deal.
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, according to people familiar with the matter.
Sulzer said on Monday 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.
The Financial Times said on Friday GE was considering whether to make a bid for Dresser-Rand, citing people familiar with the matter.
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