Tags: Oilfield | equipment | Dresser-Rand | Auction

Oilfield-Gear Maker Dresser-Rand May Go on Auction Block

Thursday, 07 Aug 2014 07:48 PM

Dresser-Rand Group Inc., the U.S. maker of oilfield equipment, is working with Morgan Stanley to prepare for possible takeover bids from companies including Siemens AG, people with knowledge of the matter said.

While Dresser-Rand isn’t actively pursuing a sale, the company retained the financial adviser after potential suitors expressed interest, said the people, who asked not to be identified because the information is private. Siemens, which is looking for oil and gas acquisitions, has been considering a bid for some time, the people said. Sulzer AG, the Swiss pumpmaker, also previously discussed a potential merger with Dresser-Rand, the people said.

Shares of Dresser-Rand, based in Houston and Paris, climbed 9 percent to $62.96 Thursday in New York, giving it a market value of $4.8 billion. The shares jumped as much as 14 percent before the close.

The company would probably attract interest from other European and U.S. companies if it decides to sell, the people said. CEO Vincent Volpe Jr. isn’t interested in a sale and is seeking defense advice from Morgan Stanley, one of the people said. In the past, Volpe’s high price expectations have been the biggest obstacle to a takeover, other people said.

Growing global energy needs and a boom in unconventional oil make Dresser-Rand’s compressors and turbines — which are used to extract, move and process oil and gas — attractive to rivals and larger industrial conglomerates. The company reported second-quarter earnings and revenue below analysts’ estimates.

Mary Claire Delaney, a spokeswoman for New York-based Morgan Stanley, declined to comment, as did Blaise Derrico, a spokesman for Dresser-Rand. Marc Langendorf, a spokesman for Siemens, declined to comment. A representative for Sulzer didn’t respond to e-mail and voicemail messages left outside regular business hours.

Gas Boom

After a failed bid to acquire Alstom SA’s gas turbines business, Siemens has “huge” firepower to pursue deals intended to capitalize on the boom in natural gas extracted from hydraulic fracturing, Chief Executive Officer Joe Kaeser said in a July interview. He said in a conference call that month that Dresser-Rand is one of a number of companies that could help its business.

Siemens has been evaluating a bid for Dresser-Rand since at least 2011, with Lazard Ltd. as an adviser, people familiar with the discussions said last year, and Germany’s Manager Magazin reported last month that the Munich-based company is preparing an offer.

Potential Suitors

Siemens, General Electric Co., Cameron International Corp. and National Oilwell Varco Inc. could be among potential buyers of Dresser-Rand, analysts have previously said.

Jeffrey Ubben, founder and CEO of ValueAct Capital Management LLC, said in April he saw several potential strategic buyers for Dresser-Rand, including National Oilwell Varco. The activist fund trimmed its stake in the company to about 2 million shares, or 2.6 percent of shares outstanding, according to a July filing, from more than 5 million shares at the end of the first quarter.

Sulzer needs to deploy cash proceeds of 850 million francs ($935 million) from the sale of a coatings unit and CEO Klaus Stahlmann says the board supports his preference for spending cash on growth, including acquisitions, over a share buyback. Sulzer is seeking acquisitions, including transformational deals in rotating equipment such as pumps and compressors and could, with leverage, do deals worth a “couple of billion” francs, Stahlmann has said.

Turbines, Compressors

Buying or merging with Dresser-Rand would mean revisiting a market that Sulzer exited in 2000, when it sold its Turbomachine business to MAN Group. Sulzer still has a unit that services turbines and compressors. While Dresser-Rand would fit what Sulzer’s looking for, Siemens has more cash and Dresser-Rand shareholders would probably prefer that deal, one of the people said.

Sulzer’s largest shareholder, Russian billionaire Viktor Vekselberg, also controls the chairmanship and another board seat. The company’s shares haven’t yet recovered to the levels of April 2007, when Vekselberg’s investment company bought a stake. Chairman Peter Loescher, who was ousted as Siemens CEO last year, became head of Vekselberg’s Swiss investment vehicle Renova Management AG in March.

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Dresser-Rand Group Inc., the U.S. maker of oilfield equipment, is working with Morgan Stanley to prepare for possible takeover bids from companies including Siemens AG, people with knowledge of the matter said.While Dresser-Rand isn't actively pursuing a sale, the company...
Oilfield, equipment, Dresser-Rand, Auction
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2014-48-07
Thursday, 07 Aug 2014 07:48 PM
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