Germany's Siemens has agreed to buy U.S. oilfield equipment maker Dresser-Rand for $7.6 billion in cash. As Ciara Lee reports it's hoping to ride a shale gas boom in the United States.
It's a 7.6 billion dollar move that will dramatically boost Siemens' oil and gas business. Europe's largest engineering company is to buy one of the world's biggest oilfield equipment makers. Dresser-Rand is US-based but manufactures in a number of countries including France, Spain and the UK. Olaf Storbeck from Reuters Breakingviews says the deal marks the beginning of a new era for Siemens. (SOUNDBITE) (English) REUTERS BREAKINGVIEWS COLUMNIST, OLAF STORBECK, SAYING: "They will become a really credible and serious challenger to GE and the overall equipment making business for the oil and gas industry. And it has to be seen in context with another acquisition they had in May where Siemens bought small turbines from Rolls Royce and these two deals together create a really significant equipment makers for the oil and gas industry." Siemens, is best known for its work in electronics and electrical engineering. But it hopes the move will help it cash in on the North American fracking boom, targeting more than 150 million euros in synergies by 2019. It will pay 83 dollars a share, that's 37% more than Dresser-Rand's July share price. (SOUNDBITE) (English) REUTERS BREAKINGVIEWS COLUMNIST, OLAF STORBECK, SAYING: "They valued it at more than 17 times more than 2015 expected operating profit, Starmine data shows. And that's about a 75% mark-up compared to what the peers are valued at. So it's really pricey and Siemens are going to have to work hard to make this acquisition pay." The German company will sell a 50 percent stake in BSH Bosch and Siemens Hausgerate, to Bosch for 3 billion euros to help pay for Dresser-Rand. General Electric and Switzerland's Sulzer had also been interested. But Siemens has ambitions to make its mark in the world's largest economy. It's expected to close the deal in 2015 subject to Dresser-Rand shareholders approval.