HOUSTON – German industrial conglomerate Siemens AG is planning to pay $7.6 billion, including debt, to buy out Dresser-Rand Group, making the Houston energy equipment maker its quintessential oil and gas business as it pushes against GE and others for elbow room in the global energy infrastructure market.
The acquisition, announced by both companies late Sunday, marks a major move for the Munich-based engineering conglomerate, a rival of GE and other global industrial manufacturers, into Houston and in the U.S. oil and gas sector as steam turbines, engines, gas turbines and compressors have found a major market in oil and gas, power generation and other industrial uses in the United States as newly tapped shale plays yield a surge in domestic natural gas output. The deal, which includes Siemens’ assumption of about $1.1 billion in Dresser-Rand’s debt, is expected to close next year.
It’s Siemens’ biggest move so far in its 2020-focused plan to seize a larger foothold in oil and gas and other industrial sectors, coming a few months after its $1.3 billion purchase of Rolls-Royce Holding’s energy business earlier this year.
Dresser-Rand in a statement said the acquisition would combine “two highly complementary businesses to create a leading world-class supplier to the oil and gas industry.” Dresser-Rand will retain its brand name and its top executives, it said.
Investors in Dresser-Rand will get $83 a share on the deal. The company’s share price on Friday closed up $6.88 to $79.91 on the New York Stock Exchange. In a recent regulatory filing, Dresser-Rand said it had about $1.15 billion in debt. That would make the cash purchase price worth nearly $6.5 billion.
As the premium brand in the global energy infrastructure markets, Dresser-Rand is a perfect fit for the Siemens portfolio,” Siemens CEO Joe Kaeser said in a written statement. “The combined activities will create a world-class provider for the growing oil and gas markets. With this Dresser-Rand will become ‘the oil and gas’ company within Siemens and fit right into our Siemens Vision 2020.”
Siemens said it plans to keep a significant presence in Houston, the epicenter of its oil and gas business. Alexander Becker, a spokesman for Siemens, said the firm will conduct a conference call with investors at 7 a.m. U.S. central time on Monday.
Siemens’ offer trumped another potential suitor, Swiss pump manufacturer Sulzer, which last week confirmed it was engaged in “non-exclusive” merger talks with the Houston firm.
Dresser-Rand, which has its main office and a 130,000 square-foot service center in Houston, had 8,100 employees around the world at the end of 2013, according to regulatory filings. It has 100,000 rotating equipment units installed in more than 150 countries.
The firm sells compressors that boost oil and gas production, a growing market for U.S. energy producers looking to get more hydrocarbons out of often stubborn shale plays.
Lisa Davis, a member of Siemens’ board, said the firm is looking “to become the leading rotating equipment and process system integrator for the oil and gas industry,” leveraging Dresser-Rand’s strengths “to offer a much broader range of products, services and solutions.”
Dresser-Rand said it has adopted a one-year shareholder rights plan to maximize the value of the deal for investors, a move that would “not in any way prevent or restrict any person from making a superior proposal.”
At a major energy conference in Houston earlier this year, Siemens’ Kaeser hinted the firm will likely expand in the United States in an effort to capitalize on the American shale oil and gas boom.
The deal is subject to shareholder and regulatory approval in the United States and Europe.