Power Engineering - EU approves Siemens €1bn VA Tech acquisition

13 July 2005 - Germany's Siemens today won permission from the European Commission to acquire Austria's VA Tech on condition the German engineering giant sells off certain businesses.

The Commission, the European Union's executive arm, said Siemens had to divest itself of VA Tech's hydro power business and ensure the independence of metal plant builder SMS Demag.

"In light of the commitments given by Siemens, the Commission has concluded that the transaction would not significantly impede effective competition in the European Economic Area or a significant part of it," the Commission said in a statement.

This marks the conclusion of the antitrust review of the takeover offer made by Siemens in December 2004. When the deal is closed in a few days, Siemens will hold 97.15 per cent of the VA Tech stock. The purchase price is approximately €1bn ($1.2bn). Siemens said it would take steps to buy-out the few remaining independent VA Tech shareholders. It also said it would immediately initiate the sale of the VA Tech hydropower generation unit.

Sales of the metallurgy, power transmission and distribution, and infrastructure units, which will now be integrated into Siemens, totalled over €3bn in 2004. Around 13 000 people are employed in these three business segments. The power generation unit posted sales of just under €900m in 2004 with approximately 3 000 employees.

"The overall strategic goals have been reached with the takeover of VA Tech," said Dr. Klaus Kleinfeld, CEO of Siemens AG, following the Brussels decision. "Our focus in this acquisition was on the metallurgy and power transmission and distribution businesses. In these areas, the VA Tech portfolio and regional presence are an outstanding fit for our Industrial Solutions and Services (I&S) and Power Transmission and Distribution (PTD) Groups, respectively, and support their global growth targets. In addition, our takeover of the infrastructure activities will considerably strengthen Siemens' already solid market position in Austria and push the expansion of our business, such as in the dynamic markets of Eastern Europe. The antitrust conditions met our expectations."

The infrastructure unit of VA Tech (comprised of VA Tech Elin EBG and ai informatics), which largely operates in Austria and Eastern Europe, will be merged with Siemens Österreich. This takeover will substantially strengthen and broaden the overall portfolio of Siemens Österreich and enhance the infrastructure business of VA Tech. The merger creates the largest Austrian provider of electrotechnical equipment, systems and services for industry, building and communal infrastructure, and for IT services. In fiscal 2004, VA Tech posted sales of nearly €900m with around 3 900 employees in this sector. With this merged business, Siemens Österreich can pursue an even more aggressive growth strategy in Central and Southeast Europe.

Siemens will fully integrate the metallurgy business of VA Tech - Voest Alpine Industrieanlagenbau (VAI) - into its Industrial Solutions and Services Group (I&S), headquartered in Erlangen, Germany. VAI, which had sales of roughly 1.2 billion euros in 2004 with about 3,400 employees, will operate as an I&S Group Company with headquarters in Linz, Austria, under the name Siemens VAI. Siemens and VAI will be one of the world's leading providers for developing and constructing iron, steel and aluminium plants. While VAI previously focused above all on developing technical solutions for the mechanical side of plant construction, I&S concentrated on electrotechnical equipment. As a result of the merger, the mechanical and electrotechnical sides of the industry will be bundled for the first time in the hands of a single provider.

The power transmission and distribution unit (T&D) of the Austrian company will be incorporated into the Siemens Power Transmission and Distribution Group (PTD), which is headquartered in Erlangen, Germany. This will enable Siemens to further reinforce its position as one of the leading international companies in this sector and provide a solid basis for sustained growth. PTD will merge VA Tech's entire T&D business with switchgear, transformers and automation solutions into its own High Voltage, Transformers, Energy Automation and Services Divisions. VA Tech T&D had sales of €1.1bn in fiscal 2004 and around 5400 employees.

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