German industrial manufacturing firm Siemens AG plans to acquire an additional 18% stake in its Indian arm from Siemens Energy AG in a deal valued at €2.1 billion ($2.3 billion), the company said on Wednesday.
The transaction will increase Siemens AG’s shareholding in the Indian entity from 51% to 69%, while reducing Siemens Energy’s stake from 24% to 6%.
The acquisition aims to fast-track the separation of business activities between Siemens and Siemens Energy in the Indian market. The agreed purchase price reflects a 15% discount on the average share price over the past five trading days prior to the agreement. Siemens will not extend new guarantees to Siemens Energy as part of this deal, the company said in a statement.
Shares of Siemens surged as much as 3% in intraday trading on Wednesday. At 2.30pm, shares of Siemens were trading 2.4% higher at ₹3,499.85 on BSE.
Roland Busch, president and chief executive of Siemens AG, emphasized the mutual benefits of this arrangement. “This solution not only benefits all parties involved but also expedites the separation process in India,” he said. “Besides providing immediate cash, it allows for additional customer guarantees, significantly contributing to Siemens Energy’s future stability and growth.”
The move is also seen as a strategic step to sharpen Siemens’ portfolio focus by accelerating the demerger of Siemens India’s energy activities. “This action will simplify and strengthen our corporate structure in India, which is a rapidly growing and strategically vital market,” Busch added.
Siemens AG and Siemens Energy have agreed to propose the demerger of the energy business to the board of directors of Siemens India. Post-demerger, Siemens Energy is set to obtain a controlling interest in the energy business, aiming to complete the process by 2025, earlier than initially planned.
Siemens said it has also arranged indirect financial measures totaling €1 billion to support Siemens Energy. This includes allowing the use of a 5% shareholding in Siemens India, valued at €750 million, as collateral for guarantees. Siemens has also agreed to purchase up to 5% of shares in Siemens India for €750 million if the collateral is utilized.
Siemens will also provide payment deferrals worth €250 million at market conditions, also serving as collateral for guarantees, it added. These measures will enable Siemens Energy to secure appropriate collateral for a bank consortium guarantee line, crucial for its business development and participation in Germany’s energy transition, it added.