Siemens Deepens Push to Digitize -- WSJ
November 15 2016 - 3:03AM
Dow Jones News
Planned acquisition of Mentor Graphics is effort to remain
leader in 'Industrial Internet'
By Christopher Alessi and Natascha Divac
FRANKFURT -- Siemens AG's planned acquisition of automation and
industrial software provider Mentor Graphics Corp. is the German
giant's latest play to stay competitive in the race to digitize
heavy industry.
Siemens on Monday offered $37.25 a share in cash, equivalent to
a 21% premium on Mentor's closing share price on Friday, giving the
U.S. company an equity value of around $4 billion.
Wilsonville, Ore.-based Mentor, which has agreed to the
acquisition, sells software and hardware design-automation tools
for the development and testing of advanced electronic systems.
Mentor's shares gained 18.3% to $36.30 in recent Nasdaq trading on
Monday.
"It's a perfect portfolio fit to further expand our digital
leadership and set the pace in the industry," said Siemens Chief
Executive Joe Kaeser.
The deal is the latest effort by Siemens to expand its
profitable industrial software and automation business, which
provides tools for digitizing old-line factories.
Siemens has been a leader in the so-called Industrial Internet,
a global effort to marry heavy industry with the Internet of
Things. The endeavor aims to increase manufacturing efficiency and
productivity by developing smart factories in which robotic
machines share data over the web, while also enabling greater
product customization on the shop floor.
Siemens and competitors, including General Electric Co. and
Robert Bosch GmbH, have been working on digitizing their own
manufacturing processes and developing software platforms and
automation tools to sell to other industrial players.
In Germany, where manufacturing remains central to a thriving
export economy, the endeavor is being driven by a joint effort of
the private and public sectors, known as Industrie 4.0. The German
government sees the initiative as a way for German firms to keep
their competitive edge amid a resurgence of manufacturing in the
U.S. and against less expensive emerging-market producers.
U.S. companies including GE have a similar initiative, known as
the Industrial Internet Consortium, which includes Siemens and
Bosch.
Since Mr. Kaeser took the top job in 2013, he has moved
aggressively to strengthen Siemens's U.S. presence and to apply the
company's digital capabilities to boost efficiency across its own
industrial businesses, such as power generation and equipment for
the oil-and-gas industry
In an interview earlier this year, Mr. Kaeser said Siemens's
expertise in automating production lines and factories gives it an
edge over rival GE. A spokesman for GE at the time said Siemens no
longer maintained an edge in the field of automation.
GE has said it would invest $1.4 billion in its fast-growing
software business this year.
Mr. Kaeser's first big push into the U.S. came in 2014 with the
$7.6 billion acquisition of oil-equipment maker Dresser-Rand Group.
Earlier this year, the company acquired U.S.-based simulation
software provider CD-adapco, in a deal valued at roughly $1
billion. The integration of that privately held firm has helped
boost growth at Siemens's Digital Factory unit, which last week
posted a 10% rise in profit for the fourth quarter of fiscal year
2016.
Siemens said it expects to close the Mentor acquisition by the
second quarter of 2017. It expects to generate synergies of EUR100
million ($108.6 million) in earnings before interest and taxes
within four years. The transaction should contribute to earnings
per share growth within three years after the closing, the company
added.
Mentor had over 5,700 employees when its fiscal year ended Jan.
31. The firm generated revenue of approximately $1.2 billion with
an adjusted operating margin of 20.2%.
Large Mentor shareholder Elliott Management Corp., which last
month increased its stake in the electronics design company to
8.1%, committed to support the transaction, it said.
Write to Christopher Alessi at christopher.alessi@wsj.com and
Natascha Divac at natascha.divac@wsj.com
(END) Dow Jones Newswires
November 15, 2016 02:48 ET (07:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Mentor Graphics Corp. (NASDAQ:MENT)
Historical Stock Chart
From Aug 2024 to Sep 2024
Mentor Graphics Corp. (NASDAQ:MENT)
Historical Stock Chart
From Sep 2023 to Sep 2024