Siemens Keeps Halliburton M&A Options Open With Sale of Bonds

Siemens CEO Joe Kaeser
Siemens CEO Joe Kaeser. Photographer: F. Carter Smith/Bloomberg

Siemens AG’s decision to sell $7.75 billion in bonds to pay for its acquisition of Dresser-Rand Group Inc. means Europe’s largest engineering company still has cash to bid for assets that Halliburton Co. is preparing to sell.

The maker of turbines, trains and health-care scanners had cash and equivalents of 9.9 billion euros ($11 billion) at the end of March, according to data compiled by Bloomberg. It took advantage of investor demand for dollar-denominated assets in yesterday’s debt sale, with a $1.75 billion tranche of 30-year bonds sold at a yield of 1.4 percentage points more than comparable treasuries.

“The bond implies that Siemens industrial net debt may rise to its self-imposed target of about the same amount as its earnings before interest, taxes, depreciation and amortization,” Bloomberg Intelligence analyst Johnson Imode said, adding that Siemens expects earnings on a similar level to last year. “To stick to that goal, Siemens must be careful not to acquire debt-laden assets should it succeed in a Halliburton bid.”

Siemens is one of more than half a dozen companies eyeing the $5 billion to $10 billion in businesses that Halliburton is preparing to sell as it seeks regulatory approval for its acquisition of Baker Hughes Inc., people with knowledge of the matter said last month.

A Siemens spokesman declined to comment on either the bond issue or a prospective bid for Halliburton assets.

Ammunition

A series of divestments meant that even with the $7.6 billion agreement to buy Dresser-Rand, Siemens probably only spent a net $1 billion on acquisitions last year, Bloomberg Intelligence estimated in October. Yesterday’s debt sale helps the Munich-based company not only retain ammunition for further deals, the dollar bond also offsets the rising cost of the dollar-denominated deal caused by the euro’s decline.

Since the Dresser-Rand deal was agreed in September, the euro has fallen about 12 percent against the dollar. Oil’s 35 percent plunge in that period has also led investors to question the wisdom of the deal, and prompted both Siemens and Dresser to cut jobs. Siemens hasn’t said how much those job cuts will cost as it seeks to achieve 1 billion euros in savings by 2016.

Chief Executive Officer Joe Kaeser is seeking to focus Siemens on equipment for energy generation and distribution. The European Commission is yet to approve the Dresser deal.

Siemens stock had jumped 1.4 percent today to 97.86 euros as of 9:13 a.m. in Frankfurt, valuing it at 86 billion euros. While that extended the gain since the Dresser deal to 3.1 percent, Siemens has still underperformed Germany’s benchmark DAX Index’s 21 percent increase in that period.

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