Oily quagmire

23 January 2015 By Olaf Storbeck

The collapsing oil price turns the German engineer’s dash for shale into a costly blunder. Its $7.6 bln September bid for U.S. oilfield kit maker Dresser-Rand will stain CEO Joe Kaeser’s reputation. With shares of Dresser’s peers clobbered, a major impairment is looming.

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Siemens AG, the German industrial conglomerate, said on Sept. 22 it would buy U.S. oilfield equipment maker Dresser-Rand Group Inc for $7.6 billion in cash. On Nov. 20, Dresser-Rand’s shareholders approved Siemens’ $83 per share offer. Siemens expects the deal to close in the summer of 2015. Starting on March 1, the price Siemens has to pay will rise by $0.55 per share a month until the closing occurs.

Since the interest of Siemens and Swiss pump maker Sulzer became public knowledge in mid-September 2014, Dresser’s shares have risen by 20 percent, while the wider U.S. oil and gas equipment and service sector lost 34 percent and the oil price halved.

In December 2014, Siemens raised its original targets of annual synergies of 150 million euros by 2019 by 30 percent. Most of the synergies are related to a perceived cross-selling potential rather than cost cuts.

Siemens will hold its annual shareholder meeting on Jan. 27 in Munich and will publish financial results for the first quarter on the same day.

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