CD-Adapco Purchase Siemens Goes Shopping

Siemens has announced the takeover of U.S. software specialist CD-Adapco for almost $1 billion. It’s not cheap but most analysts welcome the step.
With his acquisitions, CEO Joe Kaeser is transforming Siemens.


Ahead of the annual shareholders meeting in Munich on Tuesday, Siemens Chief Executive Joe Kaeser has announced the purchase of U.S. software company CD-Adapco.

The software company has revenues of some $200 million, or €185 million, and the purchase price amounts to just under $1 billion. That’s not cheap, but prices at that level or even higher aren’t uncommon in the sector. Competitor Ansys, which in 2014 had revenues of some $940 million, currently has a market valuation of $7.7 billion.

Reports of the purchase, which Siemens confirmed on Monday, doesn’t appear to have spooked investors. Siemens shares were up by over 6 percent by midday on Tuesday.

Siemens is moving in the right direction. Hans-Christoph Hirt, Hermes pension fund

Siemens also released its first quarter numbers on Tuesday, reporting that revenue was up by 4 percent.

"We delivered a strong quarter and are well underway in executing our Vision 2020," Mr. Kaeser said in a statement. "Therefore, we will raise our earnings outlook for 2016, even though the macroeconomic and geopolitical developments remain a concern for our markets."

The company also reported "major contract wins" in Europe and Africa that pushed first-quarter orders up by 27 percent year-on-year, amounting to €22.8 billion.

Siemens' new purchase of CD-Adapco is part of its ongoing push toward expansion. The New York-based company develops engineering simulation software used for wind tunnel tests in auto manufacturing, or to test the ability of oil rigs to withstand storms.

“That fits in very well with the Siemens portfolio,” said one industry source.

Siemens is the global market leader in industrial software thanks to past acquisitions, especially that of U.S. software group UGS for $3.5 billion in 2007.

Siemens wants to offer digital services along the entire production chain -- from the development of a product to planning and assembly.

The takeover of CD-Adapco is a step in the right direction, said market analyst Heino Ruland of Frankfurt-based brokerage house ICF.

Britain’s Barclays Bank also welcomed the deal, saying: “Following the move into industrial software, the acquisition appears a logical extension of the digital factory division.”


Siemens Acquisitions-01


Siemens has had a mixed record with acquisitions in recent years, especially outside the industrial software business. Its 2004 purchase of Danish company Bonus Energy was a success, enabling Siemens to get into the wind turbine market where it is now the world market leader in offshore plants.

But the 2007 acquisition of U.S. medical technology company Dade Behring quickly resulted in a major writedown. And Mr. Kaeser’s first big purchase as Siemens’ boss, the $7.6 billion acquisition of U.S. oil equipment specialist Dresser Rand in 2014, has proved ill-fated as well, given the collapse in oil prices since then.

The Dresser-Rand buy will likely be raised at the shareholder meeting because with hindsight, the purchase price appears to have been too high. But Mr. Kaeser is convinced the company was worth the money and has pointed to synergies with Siemens and stable revenues as evidence.

Mr. Kaeser will also seek the support of shareholders on Tuesday for his plan to boost spending on research and development and to promote a start-up mentality at Europe’s biggest industrial group.


Siemens Divestments-01


He has implemented a deep restructuring at Siemens and showed the first shoots of growth today in the first-quarter results for the 2015/2016 business year to September 30.

Important investors are satisfied with Mr. Kaeser’s "Vision 2020." Hans-Christoph Hirt of British pension fund Hermes said: “Siemens is moving in the right direction.”

The results of the 2014/2015 business year that Mr. Kaeser presented Tuesday morning show that the group is delivering progress, said Mr. Hirt. Now Siemens must concentrate on achieving its margin targets across all its divisions, he added. In 2014/2015, the group achieved those targets in only four of its eight divisions. The overriding goal then must be profitable growth, said Mr. Hirt.

Meanwhile, Siemens faces a new competitor with the merger of Johnson Controls Inc, a U.S. manufacturer of car batteries and heating and ventilation equipment, with Ireland-based Tyco International Plc in a $20 billion deal.

The merger announced on Monday combines Johnson Controls' commercial buildings business with Tyco's fire security business.

It will rival Siemens in the important growth market of “Smart Buildings:" management systems that integrate functions such as fire protection, heat, ventilation, climate control, lighting and video surveillance to maximize energy efficiency, safety and comfort.


Axel Höpner is the head of Handelsblatt's Munich office, focusing in particular on Allianz and Siemens. To contact the author: [email protected]