NEW YORK/LONDON (Reuters) - Industrial conglomerate Siemens AG SIEGn.DE is near an agreement to acquire U.S. oilfield equipment maker Dresser-Rand Group Inc DRC.N for all cash, according to people familiar with the matter, in a move that would significantly boost the German company’s oil and gas business in North America.
By acquiring Dresser-Rand, Siemens would receive the company’s compressors and turbines serving the oil and gas industry at a time when a North American drilling boom has increased demand for energy services and equipment.
A deal for Dresser-Rand, which has a market capitalization of more than $6 billion, could come as soon as Monday, some of the people said.
Siemens is expected to pay low- to mid-$80s per share, the people said, compared with Dresser-Rand’s Friday closing price of $79.91, which already had been trading higher on takeover speculation in the past several days.
Discussions between the two companies are continuing and could still fall apart, the people cautioned, asking not to be named because the matter is not public. A representative for Siemens declined to comment and a representative for Dresser-Rand did not respond for a request for comment.
Siemens, with its cash takeover bid, has trumped a competing offer from Swiss pump maker Sulzer AG SUN.S, which proposed merging with Dresser-Rand in an all-stock deal, according to people familiar with the matter.
Sulzer, whose chairman is former Siemens Chief Executive Peter Loescher, was hoping to convince Dresser-Rand to a merger of equals under which the combined company would be domiciled in Switzerland, the people said.
Such a tie-up had the backing of Russian billionaire Viktor Vekselberg’s Swiss investment firm Renova Group, which controls about a third of Sulzer and also reported a near 5 percent stake in Dresser-Rand on Friday, the people said.
Siemens has long coveted Dresser-Rand, which would help it grow its oil and gas business amid a boom in fracking, the extraction of natural gas from deep layers of rock using high-pressure fluid injections.
But, until now, it shied away from making a formal bid, balking at the company’s high valuation. Dresser-Rand trades at 24.6 times 12-month forward earnings, a 60 percent premium to its peers in oil and gas equipment and services, according to Reuters data.
Siemens CEO Joe Kaeser said in July that there is no quick fix for the company’s energy business, which makes products ranging from gas and wind turbines to transformers, and has weighed on profits.
Kaeser, who took power in summer 2013 after a boardroom coup, has been looking at acquisitions to better round out the energy business. One move in this direction was in May when Siemens agreed to buy the energy gas turbine and compressor business of Britain’s Rolls-Royce Holdings PLC RR.L for 785 million pounds ($1.28 billion).
A deal with Dresser-Rand would come only months after the German group lost out in a bidding war with General Electric Co GE.N for Alstom SA’s ALSO.PA energy assets in June.
Siemens also announced a restructuring program in aimed at strengthening Siemens’ focus on creating processes to help industrial companies produce more efficiently.
Siemens had cash and cash equivalents of 8.21 billion euros ($10.53 billion) at the end of June.
Reporting by Soyoung Kim in New York and Sophie Sassard and Anjuli Davies in London; additional reporting by Mike Stone and Liana B. Baker in New York, Edward Taylor and Arno Schuetze in Frankfurt; Editing by William Hardy and Marguerita Choy