PARIS, June 20 — Siemens AG’s US$11 billion (RM44.7 billion) wind-power turbine merger with Gamesa Corp Tecnologica SA creates a market giant to rival Vestas Wind Systems A/S and General Electric Co that now faces the challenge of harnessing planned savings, according to analysts at Barclays and Morgan Stanley.
From a strategic rationale standpoint, the deal is “extremely compelling,” offering attractive terms for Gamesa and the means for Siemens to expand in wind power, Kepler analyst William Mackie wrote in a note today. Siemens and Gamesa have identified cost cuts of €230 million (RM1.05 billion) within four years, and while the product synergies “are clear,” achieving that target remains a risk, Morgan Stanley analyst Ben Uglow said in a note.
“We assume only a fraction of the planned €70 million revenue synergies will be achieved,” Barclay’s David Vos and colleagues said in a note. “We don’t believe the onshore and offshore businesses offer any sort of synergy potential” in sales as the two businesses deal with different customers, technology and drivers, they said.
As well as having a stronger foothold to battle with western competitors, Siemens and Gamesa also face heightened competition from suppliers further afield, including XinjiangGoldwind Science & Technology Co of China, which grabbed the biggest market share last year. Margins in the industry have narrowed, despite increasing political pressure in recent years for clean energy and burgeoning wind-farm installations globally.
Under the terms of the combination, announced Friday, Siemens will own 59 per cent of the new business, leaving Gamesa with 41 per cent and a €1-billion cash payment for its assets.
Good fit
“In terms of product overlap, Siemens brings a number one position in offshore turbines,” and a “strong offering in developed markets,” Uglow and colleagues at Morgan Stanley wrote in a note today, rating Siemens ‘buy.’ Gamesa brings a strong position in emerging markets and a credible low wind speed turbine offering, they said.
Besides the geographic complementarity, “Siemens’ market leading offshore wind position also combines well with Gamesa’s onshore wind experience,” Bloomberg analyst James Evans wrote Friday.
Siemens shares jumped 3.2 per cent to €95.24 as of 12.16pm in Frankfurt, while Gamesa added 1.3 per cent to €18.29 in Madrid, in a bullish European market buoyed by increasing hopes that the UK will remain in the European Union trading bloc.
The combined company which will be based and listed in Spain, while the headquarters of the offshore-wind unit will be in Hamburg and Vejle, Denmark. Key risks for the operation, which is expected to close in the first quarter of 2017, include “failure to deliver on synergy targets, changes in renewables legislation, changes in subsidy programmes and risks of technology changes within the industry,” Morgan Stanley analysts wrote. — Bloomberg
