January 25, 2016 / 6:29 PM / 2 years ago

Siemens beefs up industrial software with CD-adapco

MUNICH, Germany (Reuters) - Germany’s Siemens (SIEGn.DE) has agreed to buy U.S. engineering software firm CD-adapco for $970 million, it confirmed on Monday, beefing up its core industrial business with the latest in a string of acquisitions in the area.

A Siemens logo is pictured on an office building of Siemens AG in Munich in this May 30, 2014 file photo. REUTERS/Lukas Barth

Under the leadership of former finance chief Joe Kaeser, the engineering group has shed the last of its consumer businesses to focus on its core strengths including industrial automation, where it needs ever more digital competence to keep its edge.

Melville, New York-based CD-adapco makes computer programs used by engineers to simulate the inner workings of an engine, in particular the flow of liquids and gases. It will complement Siemens’ product lifecycle management (PLM) software offering.

”As part of its Vision 2020, Siemens is acquiring CD-adapco and sharpening its focus on growth in digital business and expanding its portfolio in the area of industry software,“ said Klaus Helmrich, member of the Managing Board of Siemens.”

Reuters reported on Sunday that Siemens had agreed to buy the privately held company for close to $1 billion.

Established in 1980 and still controlled by its founders, CD-adapco has 900 employees in 50 offices and had $200 million in annual revenue and an annual growth rate of 15 percent for the past five years, according to its website.

Its main competitor in engine simulation software is Ansys Inc (ANSS.O), which trades at about 9 times trailing 12-month sales, according to Thomson Reuters Data. Siemens is paying 5 times sales.

“Post the move into PLM software, this looks to be a logical extension to the Digital Factory portfolio in our view,” Barclays analysts wrote in a note.

PLM software is designed to manage the entire lifecycle of a product from conception through to service or disposal, helping companies to speed up development and cut costs.

CD-adapco is Siemens’ biggest PLM software firm acquisition since it got into the business by buying Texas-based UGS for $3.5 billion in 2007. It has made a series of acquisitions in the area since then, including four in 2012 alone.

Since taking over two-and-a-half years ago as chief executive of Siemens, Kaeser has set out to reshape Europe’s biggest industrial group and make it more profitable and less cumbersome by selling off non-core units.

He also bought U.S. oil equipment maker Dresser-Rand in 2014, paying almost $8 billion in a deal agreed just as oil prices were on the verge of a steep decline. The move attracted widespread criticism from investors.

Siemens has increasingly had to compete with software companies who can develop technology faster because they have a sole focus. Only 5 percent of Siemens’ 350,000 employees are software engineers.

Reporting by Georgina Prodhan, editing by David Evans

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