Siemens AG (SIE), Europe’s biggest engineering company, is the preferred bidder for the power-plant construction unit Ansaldo Energia majority-owned by Finmeccanica SpA (FNC), according to people familiar with the process.
The two parties are negotiating a sales price, according to two people familiar with the process, who asked not to be identified because the talks are confidential. Finmeccanica General Manager Alessandro Pansa said on a conference call in May that the company is “at due diligence stage” with potential partners for the sale of stakes of its energy and transport units, adding that the goal is to sell them by the end of the year.
“If achieved, the deal would secure Siemens’ position in the exciting gas turbine market, and further lock out competitors such as Alstom,” said William Mackie, an analyst at Berenberg Bank. “We believe a deal priced around 1.3 billion euros ($1.7 billion) would be taken positively, and strengthening this segment would help Siemens to offset slower business in renewable energy.”
Finmeccanica shares rose as much as 4.9 percent to 3.84 euros in Milan today. They traded 3.6 percent higher at 3.79 euros at 10:26 a.m. for a market value of 2.2 billion euros. Siemens advanced 0.6 percent to 78.57 euros.
Finmeccanica tapped Banca IMI SpA and Deutsche Bank AG (DBK) to advise it in recent days, the people said, while Siemens is working with Credit Suisse Group AG. (CSGN) Siemens may aim to buy the 45 percent held by U.S. private equity firm First Reserve Corp, one of the people said, asking not to be identified because the talks are confidential.
Finmeccanica, based in Rome, tried unsuccessfully to sell shares in Ansaldo Energia to the public in 2008, and last year sold a stake in the unit to First Reserve, a buyout firm that specializes in energy assets. Last year’s stake sale valued Ansaldo Energia at 1.23 billion euros. Finmeccanica Chief Executive Officer Giuseppe Orsi has targeted 1 billion euros in non-aerospace and defense asset sales to reduce 4.66 billion euros of debt.
Gas Turbine Deals
Ansaldo Energia was the fifth-largest maker of gas turbines by market share between 2006 and 2010, Nomura said in a report last year. General Electric Co. (GE) and Siemens lead the industry, and at an investor conference on May 23, Siemens Chief Executive Officer Peter Loescher singled out gas turbines as an area where the company may make further acquisitions.
Buying Ansaldo Energia may help Siemens fend off Asian rivals seeking to get a head start in the turbines business, analysts have said. Fossil power is among Siemens’s biggest and most profitable business units. “We will do our utmost not to allow anyone to take that position from us,´´ Roland Fischer, who heads the company’s fossil power business, said in an interview in January.
Siemens’s last major acquisition in fossil power dates back to 1998, when it bought Westinghouse Power Generation for $1.2 billion. The company also agreed in March to buy a subsea power- grid equipment maker for 470 million euros from Expro Holdings, underscoring Loescher’s focus on bolt-on acquisitions rather than transformational deals.
Siemens is facing opposition from Italian unions. The Italian unions Fiom, Fim-Cisl and Uilm said in a joint statement that they oppose a stake sale to Siemens, citing concerns about jobs.
The unions urged the Italian government to intervene ‘‘urgently” to keep the company in Italian hands. Italy’s Democratic Party also called for Cassa Depositi’s Fondo Strategico to intervene, according to a statement by Senator Roberta Pinotti. The Democratic Party is one of the three parties supporting Prime Minister Mario Monti’s government.
The Italian unions said that the 55 percent stake should be temporarily transferred to Italy state lender Cassa Depositi e Prestiti SpA. Though Siemens is the preferred bidder, Ansaldo Energia has received interest from other suitors as well, one of the people said.
Torsten Wolf, a spokesman for Siemens’s energy business, had no comment. Officials at First Reserve, Deutsche Bank and Banca IMI declined to comment.
Orsi told Italy’s Senate on Aug. 1 that the company was open to retaining part of its stake in Ansaldo Energia to keep jobs.
To contact the reporters on this story: Aaron Kirchfeld in London at firstname.lastname@example.org; Marco Bertacche in Milan at email@example.com; Richard Weiss in Frankfurt at firstname.lastname@example.org