Munich, Frankfurt Siemens Energy wants to get the problems at the loss-making wind power subsidiary Siemens Gamesa under control with a complete takeover. Management confirmed on Wednesday that it would consider a cash offer for the outstanding shares. According to information from the Handelsblatt, the decision could be announced from business circles before the capital market day in the coming week.
An initial inventory of the new Siemens Gamesa boss Jochen Eickholt, whom the head office had sent to Madrid as a “troubleshooter” at the beginning of April, showed that the problems are even greater than assumed. “It’s now about stopping the bleeding,” it said in corporate circles.
The management of Siemens Energy had long shied away from the risks of a complete takeover. After all, the still young group, which emerged from the spin-off of Siemens-Energietechnik, is itself in the red because of the problems at Gamesa.
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No official decision has been made yet, and it is still possible that the project will fail. “The possible takeover will be a financial feat,” it said in supervisory board circles. With a view to the future of the entire group, however, there is no alternative. However, Siemens had released the energy technology division into independence on a financially sound basis. The Handelsblatt had already reported last week that a complete takeover is the preferred option.
Siemens Gamesa is currently valued at more than ten billion euros on the stock exchange. The cash offer could cost Siemens Energy well over three billion euros.
On Wednesday, the price of Siemens Gamesa rose by ten percent to around 16 euros after confirmation of the possible takeover. According to insiders, the offer could be between this value and the average price target of 18 euros that analysts Siemens Gamesa are currently giving. According to Spanish takeover law, the offer must be approved by the stock exchange regulator. The price must not be below the average price of the past three months.
According to financial circles, Siemens wants to pay for the takeover with the help of a bridge financing of more than four billion euros organized by JP Morgan and Bank of America. A capital increase is planned later. The banks involved did not want to comment on the information.
In the past few weeks, investors had put pressure on to solve the problem with the wind power subsidiary. The complete takeover is “the next logical step to finally get full control over the operational business of Siemens Gamesa,” said Felix Schröder, fund manager at Union Investment, on Wednesday. “Only under the complete control of Siemens Energy can the turnaround of the problematic wind turbine business succeed.”
Siemens Energy’s major shareholder Siemens had recently expressed its dissatisfaction unusually openly. The Munich technology group wants to reduce its 35 percent stake to 25 percent as quickly as possible, but is hesitant because of the low share price. Siemens CFO Ralf Thomas expects that Siemens Energy boss Christian Bruch will present important measures at the Capital Markets Day on May 24: “We assume that this will be groundbreaking.”
According to information from financial circles in the Handelsblatt, Siemens Energy was already working on a takeover bid two months ago. Because of the Ukraine war, the project was postponed again.
Siemens Gamesa bosses have been replaced several times
Siemens had brought its own wind power into the listed Siemens Gamesa under ex-boss Joe Kaeser and took over the majority in the new group. As a result, the Munich-based company played a leading role in the consolidation of the wind power industry without having to invest billions. However, the disadvantages of the design quickly became apparent: there was a lack of direct action when things were going badly.
The boss at Siemens Gamesa was changed several times. Now all hopes rest on ex-Siemens Energy board member Eickholt. Fund manager Diehl said he was the right manager to clean up at Siemens Gamesa. “You should give him the time he needs.” Eickholt also enjoys a great deal of trust on the Siemens Energy Supervisory Board headed by chief controller Kaeser.
Siemens Gamesa is currently under pressure for two reasons. On the one hand, there is the market problem: none of the major wind power providers is currently making any money. In view of the fight against climate change and the desire to become less dependent on conventional energy sources such as gas from Russia, demand is high.
But there is a strong price war between competitors such as Siemens Gamesa, Vestas, Nordex and GE Renewables. At the same time, suppliers are suffering from the massive increase in material prices, for example steel. The contracts usually did not ensure that the higher costs could be passed on to the customers.
But the problems at Siemens Gamesa are about two-thirds home-made, according to the new boss Eickholt. Among other things, the wind power specialist is having problems starting up the new onshore turbine generation 5X. The company received its first major order from Brazil. However, a proportion of local production is required there – and setting up production is causing difficulties.
In addition, the transparency of the figures is still low. This always causes irritation, especially at the parent company in Munich. A complete takeover is also necessary in order to get transparency in the figures, according to company circles.
Due to the high purchase price, the decision is not easy for the management. The operational problems have not yet been solved, according to people close to the supervisory board: “The shop has to be fixed one way or another.” Because the problems at Siemens Gamesa are not only affecting the balance sheet of Siemens Energy, but also the share price. This has fallen by a third since last summer, and the Siemens offshoot had to vacate its place in the Dax after a short guest appearance.
Against this background, the plans for a takeover of Siemens Energy met with approval from investors on Wednesday. The price has meanwhile increased by more than five percent to just under 18 euros. The euphoria died down a bit over the course of the day given the obvious risks. But it is rare that both the takeover object and the potential buyer increase and shows how much the capital markets long for a solution to the Gamesa problem.
More: Siemens Energy falls into the red – CEO Bruch faces a big dilemma