If the new Siemens boss Roland Busch has its way, then it should be the last major spin-off for the foreseeable future: The Munich-based company is separating from the transmission division in Bocholt, Flender AG. The company has only been part of Siemens since 2005. The group is selling its daughter with a book profit, so far so good. But that is also no art if you had to write off a stake several times in previous years due to a lack of profitability.
The financial investor Carlyle pays significantly less than the annual turnover for Flender, a total of 2.025 billion euros for the last 2.2 billion euros in turnover. 15 years ago, 1.2 billion euros were due for acquisition with a turnover of 1.0 billion euros at the time. In the meantime, Siemens had to invest a lot of money in the new acquisition. Calculated in this way, Flender AG was certainly not a worthwhile portfolio investment. In addition, Siemens also pays a kind of dowry when the company is sold, a long-term purchase guarantee for Flender wind power gear units.
In the past, Munich often lacked the lucky hand when buying other companies. Often you got involved in a bidding competition that drove up prices. That was the case with Flender in 2005, that was the case with the completely overpriced purchase of Dresser-Rand in 2014, and that could have been the case again this year with the takeover of the medical technology company Varian. In all of these cases, Siemens signaled a very high level of buying interest from the start, which doesn’t exactly strengthen the negotiating position. And the very high purchase price was always justified to its own shareholders with an allegedly very strong “strategic fit”. In the case of Flender, for example, it was said at the time that Siemens would finally become a full-range supplier of drive trains. The word “full-range supplier” also appeared when purchasing Dresser-Rand – and with many other acquisitions too. But the desired effects didn’t always happen.
No convincing return for Siemens shareholders
On the other hand, Siemens showed a much happier hand when it sold its holdings in companies. Just think of Osram: Siemens sold its last block of shares at the end of 2017 when Osram’s price was just below the all-time high at 65 euros. Today the share is listed at 52 euros – and this price can only be explained by the takeover offer from Austrian competitor AMS. So you could hardly sell better than Siemens back then.
The bottom line, however, is that Siemens AG has done itself a favor with its numerous portfolio measures. No other German DAX group has bought and sold as many companies as Siemens since the 1980s. Organic growth fell by the wayside in some cases. And shareholders didn’t get a compelling return for all of the risky purchases and sales. After the spin-off from Siemens Energy, Rest AG is starting all over again with sales of less than 60 billion euros. In a few years you will see what Roland Busch made of it.
Bernd Ziesemer is a capital columnist. The business journalist was editor-in-chief of the Handelsblatt from 2002 to 2010. Afterwards he was managing director of the corporate publishing division of the Hoffmann und Campe publishing house until 2014. Ziesemer’s column appears regularly on Personal-Financial.com. You can follow him on Twitter here.