German engineering company Siemens AG announced a deal to
acquire U.S. oil-equipment maker Dresser-Rand Group Inc. for $7.6
billion.
The Houston-based company is fetching $83 a share, in cash.
Dresser-Rand shares on Friday had shot up 9.4% to close at
$79.91.
The German company beat out Swiss rival Sulzer AG, which had
been in talks with Dresser-Rand over a stock-based merger,
according to people familiar with the situation. The all-cash
nature of the bid likely proved decisive in reaching a deal with
the much smaller Dresser-Rand, analysts suggested. Siemens took in
close to EUR76 billion ($97 billion) in revenue last year, while
Dresser-Rand's total revenue was $3 billion.
Reuters reported on Sunday that Siemens was close to completing
an agreement to acquire Dresser-Rand.
The acquisition is in line with Siemens Chief Executive Joe
Kaeser's aim of building up the company's presence in the U.S.
energy market and capitalizing on the shale-gas boom.
Siemens produces gas turbines and supplies equipment for
companies that extract natural gas. The merger with Dresser-Rand,
which produces compressors, turbines and other rotating equipment,
would allow Siemens to expand its gas-extraction capabilities and
more directly profit from hydraulic fracturing 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 bought most of 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 General Electric Co. on a bid for
the energy assets of gas-turbine maker Alstom SA of France.
Write to Shayndi Raice at shayndi.raice@wsj.com
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