European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Siemens Energy/Siemens Gamesa: Possible Delisting Offer

Event-Driven

Siemens Gamesa Renewable Energy, S.A. / Event-Driven

Siemens Gamesa Renewable Energy, S.A. (SGRE SM)

<div>
On 18 May, economic daily Expansion said that <a href="https://www.smartkarma.com/entities/siemens-ag" target="_blank" data-smartkarma-citation="entities:21713:1" rel="noopener">Siemens AG (SIE GR)</a> was planning to launch a delisting bid for <a href="https://www.smartkarma.com/entities/siemens-gamesa-renewable-energy-s-a" target="_blank" data-smartkarma-citation="entities:21270:1" rel="noopener">Siemens Gamesa Renewable Energy, S.A. (SGRE SM)</a>.
The CNMV (National Securities Market Commission, the Spanish market watchdog) suspended Siemens Gamesa trading shortly after 9 a.m. and until 2:30 p.m. and asked Siemens to clarify whether it will launch an exclusion takeover bid for Gamesa.
<ul>
<li>Siemens Energy (ENR GR) explained in a note to the CNMV that it was conducting a "strategic review" of its entire portfolio of assets, and that Siemens Energy was not "currently" working on a delisting bid, although it acknowledged that it had hired external advisers for the strategic review.</li>
<li>Siemens Gamesa's shares resumed trading and closed at €26.52, far from the €38.48 reached on 7 January (historical high).</li>
</ul>
Siemens Gamesa needs to step up changes to adapt to a rapidly evolving wind energy sector. Although Siemens Energy has control of the group's management, by holding the majority of Siemens Gamesa's capital, having 100% would give it total freedom to accelerate change.
There have already been some rumours of a possible takeover bid, the last one in December 2020, when it was discussed the interest of large Asian groups such as Shanghai Electric, and the Japanese conglomerate Mitsubishi, according to Expansion. These two companies reportedly approached Siemens in recent months to discuss the purchase of some Siemens Gamesa assets.
</div>
<div>
Siemens is already undergoing a deep business transformation and cost adjustment. Current prices (estimated multiples of 25.0x and 15.6x EV/EBITDA 2021e and 2022e respectively) already discount a scenario of strong growth and leave little room for pressure from higher supply costs or increased competition.
Siemens paid €20 per share (24% less than the current price) for the 8% it bought from Iberdrola in February 2020, and would not presumably be wiling to pay a high bid premium in case it decided to launch a bid for Siemens Gamesa. At current market prices (without assuming any premium), the amount of the possible takeover bid would amount to c. €5,900 mn euros (32.8% of the capitalization of Siemens Energy and 5.3% that of Siemens).
The stake in Siemens Gamesa represents c. 67.6% of the market cap of Siemens Energy. Siemens Gamesa provides about half of Siemens Energy's EBIT, which suggests that the other businesses of Siemens Energy are undervalued. Siemens Energy is 46.07% owned by Siemens.
I value Siemens Gamesa using a DCF model. My TP is €30.3/share, a 14.3% premium to the closing price on 18 May. Although I am positive on Siemens Gamesa, I do not believe that Siemens will launch a bid anytime soon.
</div>


On 18 May, economic daily Expansion said that Siemens AG (SIE GR) was planning to launch a delisting bid for Siemens Gamesa Renewable Energy, S.A. (SGRE SM).
The CNMV (National Securities Market Commission, the Spanish market watchdog) suspended Siemens Gamesa trading shortly after 9 a.m. and until 2:30 p.m. and asked Siemens to clarify whether it will launch an exclusion takeover bid for Gamesa.

Siemens Energy (ENR GR) explained in a note to the CNMV that it was conducting a "strategic review" of its entire portfolio of assets, and that Siemens Energy was not "currently" working on a delisting bid, although it acknowledged that it had hired external advisers for the strategic review.
Siemens Gamesa's shares resumed trading and closed at €26.52, far from the €38.48 reached on 7 January (historical high).

Siemens Gamesa needs to step up changes to adapt to a rapidly evolving wind energy sector. Although Siemens Energy has control of the group's management, by holding the majority of Siemens Gamesa's capital, having 100% would give it total freedom to accelerate change.
There have already been some rumours of a possible takeover bid, the last one in December 2020, when it was discussed the interest of large Asian groups such as Shanghai Electric, and the Japanese conglomerate Mitsubishi, according to Expansion. These two companies reportedly approached Siemens in recent months to discuss the purchase of some Siemens Gamesa assets.


Siemens is already undergoing a deep business transformation and cost adjustment. Current prices (estimated multiples of 25.0x and 15.6x EV/EBITDA 2021e and 2022e respectively) already discount a scenario of strong growth and leave little room for pressure from higher supply costs or increased competition.
Siemens paid €20 per share (24% less than the current price) for the 8% it bought from Iberdrola in February 2020, and would not presumably be wiling to pay a high bid premium in case it decided to launch a bid for Siemens Gamesa. At current market prices (without assuming any premium), the amount of the possible takeover bid would amount to c. €5,900 mn euros (32.8% of the capitalization of Siemens Energy and 5.3% that of Siemens).
The stake in Siemens Gamesa represents c. 67.6% of the market cap of Siemens Energy. Siemens Gamesa provides about half of Siemens Energy's EBIT, which suggests that the other businesses of Siemens Energy are undervalued. Siemens Energy is 46.07% owned by Siemens.
I value Siemens Gamesa using a DCF model. My TP is €30.3/share, a 14.3% premium to the closing price on 18 May. Although I am positive on Siemens Gamesa, I do not believe that Siemens will launch a bid anytime soon.


Siemens Gamesa Renewable Energy, S.A.

Siemens/Siemens Gamesa: Bid Rumours