How will the Siemens acquisition of Dresser-Rand change the competitive landscape?

With the recent Siemens announcement that it will purchase gas compressor and turbine supplier Dresser-Rand Group Inc., Siemens is well-poised to stake its claim as a heavyweight rival to GE, according to IHS.

10/02/2014


With recent acquisition news, Siemens seems well-poised to be a heavyweight rival to GE, according to IHS. GE Oil & Gas acquired Cameron's reciprocating compressors division in January to kick off the new year. This, coupled with GE's recent purchase of Alstom's Power and Grid business, solidified its position as a leading player in the oil and gas sector. IHS estimates that GE turbines and compressors sold into oil and gas applications account for just less than 35% of global capacity, which is roughly 10-15% more than Siemens, including its newly acquired Rolls Royce product lineup. With Siemens' recent announcement that it will purchase leading gas compressor and turbine supplier Dresser-Rand Group Inc., the company is well-poised to stake its claim as a heavyweight rival to GE.

This acquisition is not a surprise, though the timing is rather unexpected. Just last week it appeared as though Dresser-Rand was entertaining the possibility of a merger with another company that is well positioned in the oil and gas sector, the Swiss industrial pump manufacturer Sulzer. Talks of a potential merger between Sulzer and Dresser-Rand seem to have contributed to a recent spike in DRC's stock price, requiring a larger investment by Siemens to win the bid for the compressor and turbine provider. In fact, the acquisition cost Siemens $83 per DRC share, a premium of roughly 37% to the share price back in July before acquisition talks were public knowledge. Siemens appears to be quite confident in its newest investment despite the premium. "The valuation is a stretch, but strategically it makes sense," said Volker Stoll, a Stuttgart-based analyst at Landesbank Baden-Wuerttemberg.

European oil and gas equipment providers like Siemens, Sulzer, Howden and others have long desired to expand into North America to take advantage of the highly attractive conventional and unconventional energy plays. DRC has been a major player in this sector as its foothold in North America is substantial. This acquisition is a strategic win for Siemens, both geographically and technically. Aside from greatly expanding its U.S. presence, Siemens will gain a strong foothold in such lucrative areas as subsea compression, carbon capture and storage (CCS) and compressed air energy storage (CAES), in which DRC has been a pioneer.

The full impact of this acquisition remains to be seen, but one thing that is certain is that GE Oil & Gas now has a much more formidable rival in Siemens. The most successful oil and gas equipment providers are the ones that can offer custom full-scale solutions and exceptional after-sales support. DRC and Siemens have both been successful in these areas over the years, with aftermarket parts and service accounting for more than 50% of their respective revenues. With Siemens' regional breadth and DRC's technical capabilities, this acquisition has a lot of potential to elevate Siemens' market position.

- Source: IHS. Edited by CFE Media, Control Engineering, Consulting-Specifying Engineer and Plant Engineering



No comments
The Engineers' Choice Awards highlight some of the best new control, instrumentation and automation products as chosen by...
The System Integrator Giants program lists the top 100 system integrators among companies listed in CFE Media's Global System Integrator Database.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
This eGuide illustrates solutions, applications and benefits of machine vision systems.
Learn how to increase device reliability in harsh environments and decrease unplanned system downtime.
This eGuide contains a series of articles and videos that considers theoretical and practical; immediate needs and a look into the future.
Motor specification guidelines; Understanding multivariable control; Improving a safety instrumented system; 2017 Engineers' Choice Award Winners
Selecting the best controller from several viewpoints; System integrator advice for the IIoT; TSN and real-time Ethernet; Questions to ask when selecting a VFD; Action items for an aging PLC/DCS
Robot advances in connectivity, collaboration, and programming; Advanced process control; Industrial wireless developments; Multiplatform system integration
Motion control advances and solutions can help with machine control, automated control on assembly lines, integration of robotics and automation, and machine safety.
This article collection contains several articles on the Industrial Internet of Things (IIoT) and how it is transforming manufacturing.

Find and connect with the most suitable service provider for your unique application. Start searching the Global System Integrator Database Now!

Future of oil and gas projects; Reservoir models; The importance of SCADA to oil and gas
Big Data and bigger solutions; Tablet technologies; SCADA developments
SCADA at the junction, Managing risk through maintenance, Moving at the speed of data
Automation Engineer; Wood Group
System Integrator; Cross Integrated Systems Group
Jose S. Vasquez, Jr.
Fire & Life Safety Engineer; Technip USA Inc.
click me