GE Oil & Gas acquired Cameron’s reciprocating compressors division in January to kick off the new year. This, coupled with GE’s recent purchase of Alstom’s Power and Grid business, solidified its position as a leading player in the oil & gas sector. IHS estimates that GE turbines and compressors sold into oil and gas applications account for just less than 35% of global capacity, which is roughly 10-15% more than Siemens, including its newly acquired Rolls Royce product lineup. With Siemens’ recent announcement that it will purchase leading gas compressor and turbine supplier Dresser-Rand Group Inc. (NYSE: DRC), the company is well-poised to stake its claim as a heavyweight rival to GE.
This acquisition is not a surprise, though the timing is rather unexpected. Just last week it appeared as though Dresser-Rand was entertaining the possibility of a merger with another company that is well positioned in the oil and gas sector, the Swiss industrial pump manufacturer Sulzer. Talks of a potential merger between Sulzer and Dresser-Rand seem to have contributed to a recent spike in DRC’s stock price, requiring a larger investment by Siemens to win the bid for the compressor and turbine provider. In fact, the acquisition cost Siemens $83 per DRC share, a premium of roughly 37% to the share price back in July before acquisition talks were public knowledge. Siemens appears to be quite confident in its newest investment despite the premium. “The valuation is a stretch, but strategically it makes sense,” said Volker Stoll, a Stuttgart-based analyst at Landesbank Baden-Wuerttemberg.[Continue reading →]