German conglomerate Siemens AG said Wednesday it intends to buy an 18% stake in its Indian joint venture from Siemens Energy AG for 2.1 billion euros ($2.28 billion) in cash.
The transaction would increase Siemens’ stake in the Mumbai-listed Siemens Ltd from 51% to 69%, while Siemens Energy’s stake would decrease from 24% to 6%, the conglomerate said in a statement.
The purchase price reflects a discount of 15% on the volume-weighted average price for five trading days before the day of signing.
Shares of Siemens Ltd were 2.3% higher at Rs 3,497.05 apiece on the BSE in late afternoon trade on Wednesday.
Siemens and Siemens Energy, a manufacturer of gas and wind turbines, have also agreed to separate Siemens Ltd's energy business by way of a demerger. The demerged entity will be listed on the stock markets and will be majority-owned by Siemens Energy.
The companies said that the transactions are part of financial measures taken by Siemens AG to support the stability of Siemens Energy, which reported a 4.6 billion euros ($5.0 billion) net loss for the year through October 2023.
India demerger
Siemens Energy was spun off from Siemens AG in 2020. However, they did not separate their businesses in India at the time as it was not feasible, they said. They now aim to complete the India demerger in 2025 – significantly earlier than previously planned.
The companies said that, with the intended acquisition of an additional stake by Siemens AG in Siemens Ltd, they are accelerating the unbundling the business activities of the Indian subsidiary.
“Together, we shaped a solution that is in the best possible interests of all parties and accelerates the separation of Siemens and Siemens Energy in India. Besides the immediate cash inflow, we are also enabling an additional line for customer guarantees, making a strong overall contribution to the future stability and growth of Siemens Energy,” said Roland Busch, President and CEO of Siemens AG.
“For our shareholders, the accelerated demerger of Siemens Ltd India’s energy activities will further sharpen the portfolio focus of Siemens. It also simplifies and strengthens our corporate structure in India, a fast-growing and strategically important market.”
Siemens AG also said it has agreed with Siemens Energy indirect financial measures totaling one billion euro to allow third parties to arrange guarantees for Siemens Energy.
For instance, Siemens AG will allow Siemens Energy to use its 5% shareholding in Siemens Ltd, worth 750 million euro, as collateral for guarantees. If the collateral is drawn, Siemens has committed to buy up to 5% of shares in Siemens Ltd for 750 million euro.
