After a continuous struggle and attempts to acquire Dresser-Rand Group Inc. (NYSE:DRC) for the last three years, Siemens AG (ADR) (OTCMKTS:SIEGY) might have to offer a record bid for the company. Siemens is ready to pay up to $80 for every share of the company, which will put market cap of Dresser-Rand Group Inc. (NYSE:DRC) at $4.8 Billion.
The primary reason behind the acquisition is Siemens AG (ADR)’s attempt to gain a stronger foothold in the energy industry, as said by Gabelli & Co.
According to an analyst at Gabelli, Justin Bergner, “Siemens and Dresser-Rand are natural partners, particularly as Siemens pushes down this strategic path to build out an oil and gas offering. Siemens has the most compelling business case and therefore a reason to pay the most.”
The current estimated bid which is offered by Siemens AG (ADR) (OTCMKTS:SIEGY) will put this deal ahead of the General Electric Co.’s bid for acquiring Lufkin Industries Inc. in 2013. The offer is 18 times of Dresser-Rand Group Inc. (NYSE:DRC)’s last year earnings. In fact, the analysts are in favor of this bid because of the innovative subsea technology and continuous maintenance cash flow of Dresser-Rand Group Inc. (NYSE:DRC).
According to the CEO of Siemens AG (ADR) (OTCMKTS:SIEGY), Joe Kaeser, the company has a huge firepower for this deal after bailing out of the bidding war of Alstom SA’s gas turbine division. He further added that the company is planning to capitalize on the soaring production of health-care units. Kaeser added, “Our products are good, but our installed base is not that great.” Dresser-Rand Group Inc. (NYSE:DRC) will offer an edge in the largest compressor systems throughout the USA. The company has a separate set of money ready to be put in use for the acquisition.
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This article has been written by Prakash Pandey and edited by Serkan Unal.
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