Germany's Siemens and Spain's Gamesa will merge Siemens' wind power business, including wind services, with Gamesa to create one of the world's largest wind power firms, the two companies announced today (17 June).
The aim of the merger is to help expand Siemens' foothold in offshore wind to the onshore market, where Gamesa is a strong player. Geography is another big factor. Siemens' wind power business has a strong foothold in North America and Northern Europe, while Gamesa has ground in India, Latin America, and Southern Europe.
"The two businesses are highly complementary in terms of global footprint, existing product portfolios and technologies. The combined business will have a global reach across all important regions, and manufacturing footprints in all continents," Siemens said.
The new company's global headquarters and onshore headquarters will be in Spain, the offshore headquarters will be in in Hamburg, Germany, and Vejle, Denmark, Siemens said.
Siemens will hold 59% in the new company while Gamesa's existing shareholders will hold 41%. As part of the merger, Siemens will fund a cash payment of US$4.23 (€3.75) per share, which will be distributed to Gamesa's shareholders (excluding Siemens) immediately following the completion of the merger. The cash payment represents 26% of Gamesa's unaffected share price at market close on 28 January 2016.
The new company, Siemens said, is expected to have on a pro forma basis (last twelve months as of March 2016) a 69 GW installed base worldwide, an order backlog of around $22.5 billion (€20 billion), revenue of $10.5 billion (€9.3 billion) and an adjusted EBIT of $945 million (€839 million).
"The merger with Siemens constitutes recognition for the work performed by the company in recent years and evidences our commitment to generating value in the long term by creating significant synergies and extending the horizon of our profitable growth," said Ignacio Martín, Executive Chairman and CEO of Gamesa.
One big factor in the offshore renewables market is scale and cost, and Siemens sees this merger as a way to affect those issues.
"The combination of our wind business with Gamesa follows a clear and compelling industrial logic in an attractive growth industry, in which scale is a key to making renewable energy more cost-effective,"said Joe Kaeser, President and CEO of Siemens AG. "With this business combination, we can provide even greater opportunities to the customers and value to the shareholders of the new company. The combined business will fit right into our Siemens Vision 2020 and underlines our commitment to affordable, reliable and sustainable energy supply."
Siemens and Gamesa expect significant synergy potentials in a combined setup. In total, annual EBIT synergies of $260 million (€230 million) are expected in year four post-closing.
"As a leading wind power player, especially in emerging markets, Gamesa is a perfect partner for us. Teaming up will enable Siemens and Gamesa to offer a much broader range of products, services and solutions to meet customer requirements. The move will put Siemens and Gamesa in the best position to shape the industry for lower cost of renewable energy to the consumers," said Lisa Davis, member of the Managing Board of Siemens AG.
The envisaged combination is unanimously supported by Gamesa's Board of Directors and Siemens' Supervisory Board. Iberdrola has entered into a shareholders agreement with Siemens and will hold around 8% in the combined company after closing of the transaction.
The transaction is subject to approval by Gamesa's shareholders and to other customary conditions such as merger control clearances and the confirmation by the Spanish stock market regulator (CNMV) that no mandatory takeover bid has to be launched by Siemens following completion of the merger. Supervision of the merger process has been entrusted by Gamesa to a Merger Committee created ad hoc, which will be made up exclusively of independent directors. Closing is expected in Q1 2017.
Additionally, Gamesa and Areva have entered into contractual agreements whereby Areva waives existing contractual restrictions in Gamesa's and Areva's offshore wind joint venture Adwen, simplifying the merger between Gamesa and Siemens. As part of these agreements, Gamesa – in alignment with Siemens – grants Areva a put option for Areva's 50% stake and a call option for Gamesa's 50% stake in Adwen. Both options expire in three months. Alternatively, Areva can in this time divest 100% of Adwen to a third party via a drag-along right for Gamesa's stake.
This merger between Siemens and Gamesa is unlikely to be the last in the wind power market. Reuters reported yesterday (16 June) that GE is in talks to acquire Areva-Gamesa's offshore wind joint venture Adwen.
Earlier this week, Siemens broke ground on a new offshore wind turbine plant in Cuxhaven, Germany.
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