Siemens Energy offers four billion euros for the complete takeover of Siemens Gamesa

After a supervisory board meeting, the energy technology group announced a voluntary takeover bid for the outside shares in the amount of EUR 18.05 per share on Saturday evening. This corresponds to a premium of almost 28 percent on the share price before the plans were announced. The company confirmed on Wednesday that it was considering a full takeover. After the takeover, Gamesa will be delisted.

So far, Siemens Energy has owned two-thirds of the listed Spanish subsidiary. With the planned complete takeover, Siemens Energy is expressly committed to the renewable energies business. In view of the problems, there was speculation that the young company could even part with wind power as a last resort.

“Our goal is to play a decisive role in shaping the energy transition as a leading energy technology company,” said Christian Bruch, CEO of Siemens Energy. With a more holistic offer, the merged company will be even better positioned.

For Siemens Energy, which itself is in the red, the takeover bid is a financial feat. For the financing of the purchase offer there are binding financing commitments from Bank of America and JP Morgan, it was said. If the offer is accepted in full, they want to finance up to 2.5 billion euros “with equity or equity-like instruments”. The remaining amount will be financed through debt and existing cash.

The merger of Siemens Wind Power with Spanish turbine manufacturer Gamesa in 2016 was one of the biggest deals in the wind energy industry. The new group wanted to play a leading role in onshore and offshore wind power in the world.

Although Siemens Gamesa is still one of the largest providers in the world, the German-Spanish team is even the market leader at sea. But business is anything but smooth. One profit warning after the next, red numbers and four bosses within six years. There are mutliple reasons for this.

1. The market environment: price wars and cost increases

Part of Siemens Gamesa’s problems can be traced back to the difficult market environment. The booming demand worldwide is ensuring full order books, but margins have been under pressure in recent years despite rising sales.

Now there were supply chain problems and massive increases in raw material prices as a result of the corona pandemic and the war in Ukraine. However, the contracts usually do not provide for automatic price adjustments – this has taken its toll on the industry. The turbine manufacturers are mostly making losses, even model student Vestas from Denmark has cut its forecasts.

At the same time, the wind power companies, spoiled by subsidies, have to prove themselves in more and more countries in open tenders, in which only the cheapest gets the contract. For this reason, there has been ruinous price competition on the international market for years. However, the manufacturers are finding it difficult to get their costs down.

However, the vast majority of Siemens Gamesa problems are homegrown.

2. Homegrown operational problems: The new turbine is stuck

When Siemens and Gamesa merged in 2016, Siemens contributed a strong position in offshore wind power on the high seas. Gamesa was mainly active in onshore wind turbines. Siemens’ hope of transferring the strengths of the profitable offshore division to wind turbines on land was not fulfilled.

At the moment, the main problem is the ramp-up of the new 5.X generation of wind turbines. This is Siemens Gamesa’s first jointly developed platform for onshore wind turbines and is the most powerful onshore geared turbine to date. The company received its first major order from Brazil. However, some local production is required there – and setting up production caused difficulties.

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In a conversation with the Handelsblatt last year, Andreas Nauen, CEO at the time, admitted that the projects were too risky and that the scope of services was planned too optimistically and that the company was not very good at. Industry experts criticize that Siemens Gamesa did itself a disservice by taking over Senvion’s service division.

After his predecessor had failed to get the problems under control for three years, Nauen should finally get on track as the new Gamesa boss. After all, he had made the wind giant the world market leader at sea.

In March, however, Nauen also had to vacate his post again after only a year and a half and three profit warnings. Since then, Siemens Energy board member Jochen Eickholt has been at the helm of the wind company.

With the new boss, however, the old problems remain. Above all, the merging of the German and Spanish corporate cultures is causing major problems for the group.

3. The cultural problem: silo thinking and integration that is still not complete

Industry circles say that the integration of Gamesa with Siemens has not yet been completed. For years, the difficult relationship between the former Gamesa major shareholder Iberdrola and Siemens had made headlines. There were often arguments behind the scenes.

The Spaniards used to be the sole major shareholder at Gamesa and also claimed a lot of influence in the new group. Just two years ago, the Munich technology group bought out its co-shareholder Iberdrola for one billion euros. But the problems remained.

While Gamesa was best known for its low prices for onshore turbines, Siemens always relied on German thoroughness. Previously heavily involved in emerging markets, Gamesa has demonstrated a high degree of flexibility and a focus on reducing costs.

Siemens, on the other hand, pays great attention to quality protocols and structures that must be adhered to. Two cultures that have not wanted to come together since the merger of the two manufacturers. According to business circles, there are still many silos that need to be broken down.

The restructuring of the wind power business will not be easy, even after integration. SGRE is “currently in a difficult financial situation due to operational issues and industry-related challenges,” the statement said.

Now, however, “necessary measures could be better taken to stabilize the business and unlock the full potential of SGRE”. Siemens Gamesa will benefit from Siemens Energy’s restructuring expertise. “This is particularly true in the areas of production, supply chain, project and customer management.”

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