Siemens mulls €5bn Gamesa bid for new markets push


February 1, 2016

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And the world’s undisputed wind turbine manufacturing champion is… well, nobody…

There is a handful of large companies out there, of course. In terms of market share, the likes of GE, Siemens and Vestas are slugging it out at the top. But we could not single out any of them as being the undisputed turbine-making champion.

Now Siemens is looking to step up the fight. It is reportedly working with Deutsche Bank to determine if it could create a manufacturing giant with Gamesa. It is eyeing possibilities including a takeover of the Spanish firm, and is in talks with Gamesa’s largest shareholder, Iberdrola, which owns a 19.7% stake.

Meanwhile, we understand Gamesa is talking to investment banks to advise it about any deal. Both sides will have much to discuss.

So far there has been little by way of official comment from either company. Siemens has declined to comment, while Gamesa said in a regulatory filing that it “regularly analyses the different strategic options that are presented to the group” but has made no decision. Analysts have valued a takeover in the region of €4bn-€5bn.

So there is plenty left to do, but there is a very good chance that the German firm will launch a bid. Talks like this rarely become public unless there is some truth in them.

And there is also a good chance that the pair could reach a deal. We see a lot of parallels here with the €785m acquisition by Nordex of Acciona’s wind arm, which is set to complete in spring. That transaction is subject to approval by competition authorities.

On the most basic level this is also a German company looking to buy a Spanish company. The business cultures may differ between those two countries, but the fact is that paralysis in Spain’s wind market has forced Spanish firms into emerging markets. That makes them good targets for Germans, who have benefited from a strong domestic market but are now looking to diversify further.

For example, Gamesa would give Siemens a strong foothold in markets like Latin America, where the potential for wind in some countries is good despite the region’s wider slowdown. Gamesa is also in India, and the largest overseas turbine supplier in China. This would help the German firm’s existing overseas moves.

There is also a good fit in terms of sectors. Both companies are active onshore, though it is offshore where we see most intrigue.

Siemens is the market leader offshore despite a strong recent showing by MHI Vestas. If the German giant were to buy into Gamesa then it would also get a stake in Adwen, the offshore tie-up between Areva and Gamesa. That should bolster Siemens in the nascent French offshore sector and the market as a whole.

A challenge for Siemens would be making sure it does the deal at the right price. The recent buyout by Centerbridge of Senvion suggests a price of at least €4bn, but Siemens may end up going closer to €5bn if it is to convince its target’s existing investors.

Now, let’s assume an offer is made imminently and accepted. Our big question then is how long it takes to get approval from all of the competition authorities. If Siemens bought Gamesa then it would give the firm a 15% market share, compared to GE’s 11% and Vestas’s 10%. That would certainly give competition authorities food for thought, and so we think it is unlikely that any deal would close before the first quarter of 2017.

Plenty to consider, then. Now we need Siemens and Gamesa to show their hands.

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