After four months, E.U. antitrust regulators approve Siemens deal for oil & gas compression equipment manufacturer
E.U. antitrust regulators unconditionally approved Siemens’ (ticker: SIE) acquisition of Houston-based Dresser-Rand (ticker: DRC) for total consideration of $7.8 billion, according to a press release from Siemens. The E.U. antitrust regulator initiated a review after voicing concerns that after purchasing Dresser-Rand, Siemens would not have any significant competitors.
According to a release from the antitrust commission, the commission was concerned in particular about aero-derivative gas turbines (ADGT) drivers, turbo compressors and turbo compressor trains (the combination of a turbo compressor with a driver) driven by ADGTs which are used widely in the oil and gas industry for E&P, transportation and storage, and for the refining and production of various oil and gas products. Siemens acquisition of DRC will reduce the number of significant suppliers of such products from three to two, according to the commission.
Commissioner Margrethe Vestager, in charge of competition policy, commented: “After a detailed assessment of the markets involved, the Commission is satisfied that European consumers will not be negatively affected by the merger.”
Siemens will pay all Dresser-Rand shareholders $85.20 per share. The purchase price comprises the offer of $83 per share plus a time-dependent ticking fee totaling $2.20 per share for the months of March to and including June 2015. The overall consideration for acquiring all outstanding DRC shares includes the assumption of outstanding financial debt of $1.2 billion. Dresser-Rand generated revenue of around $2.8 billion in fiscal 2014. DRC’s shares closed at $85.17 per share on June 29, 2015.
“With Dresser-Rand on board, we now have a comprehensive portfolio of equipment and capability for the oil and gas industry and a much expanded installed base, allowing us to address the needs of the market,” said Lisa Davis, member of the Managing Board of Siemens. “The current level of oil prices increases the focus of our customers for ways to reduce costs. Despite the challenges of a low oil price, this also brings opportunities as we focus our efforts on offers that reduce costs and increase efficiency.”
Siemens plans to finance the purchase price from operating and investing cash flows and with newly issued USD bonds, according to the company’s press release. Dresser-Rand Group’s shares will be delisted effective July 2015.
Once the acquisition is complete, DRC’s business will form a new unit within Siemens Power and Gas Division with a primary focus on the oil and gas industry. SIE anticipates annual synergies of about €200 million (about $223 million) from the integration of DRC by 2019.