Gamesa considers rumoured Siemens interest 'ordinary'

SPAIN: Gamesa brushes aside reports Siemens is looking at a possible acquisition of the Spanish manufacturer, stating that it regularly considers strategic opportunities.

Gamesa said it "regularly analyses the various strategic opportunities presented for the group"
Gamesa said it "regularly analyses the various strategic opportunities presented for the group"

Following an announcement to the Spanish financial regulator, German conglomerate Siemens is reported to have contracted Deustche Bank to look at the viability of a possible acquisition of its turbine manufacturing rival.

Spanish media is reporting that Siemens group CEO Joe Kaeser is in talks with utility Iberdrola, which has a controlling 19.7% share of its manufacturing counterpart. 

Siemens remained tight-lipped and in a note to Spain's financial regulator, the National Securities Market Commission, Gamesa said: "In relation to the news and rumours about a possible corporate transaction between Gamesa Corporation Technology and Siemens AG, we hereby inform you that, in the ordinary course of its activity, the company regularly analyses the various strategic opportunities presented for the group. 

"At the date of this communication it has not taken any decision and no agreement has materialised about," the statement said.

Gamesa’s shares leapt from €14.40/share at close on 28 January to a high of €17.66/share following the release of the note as rumours of a potential merger or takeover circulated, confirming the confidence investors had in the seriousness of the negotiations. Siemens shares also saw a small rise on the day of the note.

This is not the first time that Siemens has been active in the mergers and acquisitions arena. In 2014, it was reported that Siemens, in partnership with Japanese firm Mitsubishi Heavy Industries, made a late bid to acquire Alstom’s power business and rival GE’s offer. It ultimately missed out, with GE completing the €9.7 billion takeover in October 2015, forcing the German firm to turn its attentions elsewhere.

Should a deal materialise, it could be one of the largest in the wind sector. The industry is not unfamiliar with acqusitions and mergers of recent, following GE's finally took over Alstom's power business in November 2015, and the ongoing merger of Nordex and Acciona.

FTI Consulting said a merger would represent an important business opportunity for Siemens to tap in to emerging markets and a low-cost supply chain. 

It is understood a possible takeover of an OEM has been the topic of conversation on the Siemens board for some months. A deal with Gamesa would give Siemens an important business opportunity to tap into emerging markets and a low-cost supply chain, according to FTI Consulting analysts.

This comes on the back of falling oil and gas prices, as well as challenging market conditions in the wind sector, including price pressures, consolidation, a move towards tender-based support mechanisms and competition from Chinese OEMs.

"Siemens could be looking to further cement its place in the renewables sector," said FTI managing director for economic and financial consulting, Aris Karcanias. The move comes on the back of falling oil and gas prices and challenging market conditions in wind sector with price pressures, consolidation, a move towards tender based mechanisms and competition from Chinese OEMs.

Siemens’ position in the various rankings of largest wind turbine manufacturer in 2014 hovered around second, with Make Consulting rating it first ahead of Vestas, and others placing it fourth. Gamesa tended to come in at seventh or eighth. Should a merger go ahead, the combined company could have a 14-15% share of the market, surpassing Vestas as the leading OEM, said FTI, which placed Siemens second in 2014 with 9.5% market share, after Vestas with an 11.4% share.


The technology between Gamesa and Siemens is not a perfect match, noted Karcanias, nor would it be a "natural consolidation" of turbine offerings. The possible takeover is more of a business than a technological opportunity, said Feng Zhao, senior director at FTI.

"It opens up a number of the important, emerging and established markets [for Siemens]. Gamesa is strong in Mexico, Brazil, India and China and has a strong low-wind offering," Karcanias said. Gamesa also has a strong and flexible supply chain allowing them to offer a lower cost of energy and a stronger service proposition, he added.

Gamesa's link with Iberdrola, one of the largest developers in the wind market, sees the companies cooperate on a number of projects together. "I would imagine Siemens would want to continue the relationship with Iberdrola," Karcanias said, adding that shoul d the deal take place, Iberdrola would likely want to maintain its connection to an established OEM. 

Growth markets

Gamesa was the second largest foreign OEM behind Vestas in China in 2014, and the largest wind turbine supplier in India at present.

In contrast, Siemens has limited involvement in the China. It has a license agreement with local manufacturer Shanghai Electric but that is unlikely to help it gain market traction.

Considering China and India are expected to account for more 45% of new wind power installation in the world in the next 5-10 years, the potential deal not only creates the best market entry for Siemens in the world's number one and number five markets, but provides a market share guarantee for the future as well, Zhao said.

As for the offshore sector, where Siemens is perhaps strongest, Gamesa has already partnered with Areva in its Adwen joint venture, offering 5MW and 8MW turbines. As this is being placed under Gamesa’s brand, it could be something that could also be taken on by Siemens, which offers up to 7MW turbines for offshore projects.

"It is unclear where [Adwen] would reside," said Karcanias. Siemens, as the leading offshore wind OEM, would naturally seek to benefit from further consolidating its position in this growing sector.

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