Siemens Prepares Bid for Energy Company Dresser-Rand – WSJ

FRANKFURT—In a sign of the U.S. energy market’s increasing draw for European companies, Siemens AG SIE.XE -1.45% of Germany and Swiss rival Sulzer AG SUN.EB -4.34% are lining up competing bids for Dresser-Rand Group Inc., DRC +9.42% a Houston-based oil-equipment maker, according to people familiar with the matter.

Siemens is preparing a cash offer for Dresser-Rand of more than $6 billion, or above $80 a share, these people said. The bid would likely edge out in value an earlier offer from Sulzer, the people said Friday. Terms of Sulzer’s offer weren’t disclosed.

In a twist late Friday, Renova Group, a holding company controlled by Russian oligarch Viktor Vekselberg, who is Sulzer’s largest shareholder, said it had taken a 4.99% stake in Dresser-Rand.

Analysts suggest that Sulzer and Dresser-Rand would be complimentary if merged, but because the offer will likely include stock it could lose out to a larger all-cash bid from Siemens.

Sulzer specializes in manufacturing pumps, but like Dresser-Rand also produces compressors, turbines and other rotating equipment. The two are also comparable in terms of revenue; Sulzer’s total last year was about $3.4 billion, while Dresser-Rand took in $3 billion.

Sulzer, headed by former Siemens chief Peter Loescher, earlier this week said it was “in nonexclusive discussions with Dresser-Rand regarding a potential transaction.”

Germany’s Manager Magazine reported earlier Friday that Siemens is working on a bid for the company.

General Electric Co. GE +0.31% , which has plowed around $14 billion into oil- and gas-services businesses over the past several years, has looked at Dresser-Rand in the past and could make a bid now that it is in play, though a deal between the two companies is unlikely, a person familiar with the matter said.

A bid by Siemens for Dresser-Rand would be in line with Siemens CEO Joe Kaeser’s aim to build the company’s presence in the U.S. energy market and capitalize on the shale-gas boom.

Siemens produces gas turbines and supplies equipment for companies that extract natural gas. A merger with Dresser-Rand would allow Siemens to expand its gas-extraction capabilities and more directly profit from the hydraulic fracking movement in the U.S.

Siemens’s large supply-chain network would enable it to harness Dresser-Rand’s profitable business in spare parts and a “very high recurring stream of revenues,” said Robert Norfleet, an analyst with Alembic Global who covers Dresser-Rand. At the same time, analysts say Dresser-Rand is poised to benefit from growing demand for compressors for offshore oil-production platforms spurred by expansion of the U.S. energy industry.

Siemens is one of a number of German industrial companies, including chemicals groups BASF SE and Wacker Chemie AG, shifting to the U.S. energy market, in part because of Germany’s strict controls over shale-gas exploration.

Mr. Kaeser in May appointed American Lisa Davis to head Siemens’s power business, which is being led for the first time from the U.S.

Siemens in May also bought most of British turbine-maker Rolls-Royce Holdings PLC’s civil energy operation for roughly $1.3 billion. The division has many customers in the oil-and-gas extraction industry.

In June, Siemens lost out to GE on a bid for the energy assets of gas-turbine maker Alstom SA ALO.FR -0.11% of France.

—Alison Sider and Dana Cimilluca contributed to this article.

Write to Eyk Henning at eyk.henning@wsj.com and Shayndi Raice at shayndi.raice@wsj.com

via Siemens Prepares Bid for Energy Company Dresser-Rand – WSJ.