Siemens Energy AG launched a bid May 21 to take over and delist its struggling wind-turbine manufacturing unit Siemens Gamesa Renewable Energy SA in the hope that fully integrating the subsidiary will help accelerate its turnaround.

The voluntary cash tender offer of €18.05 per share amounts to about €4.0 billion for the 32.9% stake in Siemens Gamesa that Siemens Energy does not already own. It expects to complete the deal in the second half of 2022.

The price represents a 27.7% premium on the wind-turbine maker's closing price of €14.13 on May 17 — the day before Siemens Energy confirmed media reports about it planning a takeover bid, which boosted Siemens Gamesa's shares. The company's stock price had risen further to €17.80 by about 11:30 a.m. in Madrid on May 23, following Siemens Energy's announcement over the weekend.

In explaining the rationale for the bid, Siemens Energy CEO Christian Bruch pointed to the poor financial performance of Siemens Gamesa — evidenced by multiple profit warnings — as well as operational challenges and industrywide obstacles in the supply chain that will be easier to navigate when fully integrated.

"There's a lot of things ... you can do as a majority owner," Bruch told analysts May 23. "However, in terms of the speed and effectiveness to implement these actions, the full integration will help us a lot to make it faster and more effective."

After the takeover, Siemens Energy intends to be more closely involved in the wind unit's day-to-day operations. The deal will realize up to €300 million of annual cost synergies within three years after full integration, the company said in a news release, along with revenue synergies in the mid-triple-digit million euro range by the end of the decade.

Siemens Gamesa will also benefit from its parent's turnaround expertise. Siemens Gamesa CEO Jochen Eickholt, a former executive board member at Siemens Energy, is known as a "turnaround specialist" and just over two months into the job has already launched task forces to help return the company to profit.

"Everything he has seen, he has seen before," Bruch said about Eickholt's assessment of Siemens Gamesa.

Funding for the acquisition is being fully underwritten by Bank of America and J.P. Morgan. Assuming full acceptance by Siemens Gamesa's minority shareholders, Siemens Energy intends to finance the deal with up to €2.5 billion of equity or equity-like instruments, with the remainder as debt or cash.

The deal will generate value for shareholders of both companies, Siemens Energy said, and ultimately allow Eickholt and his management team to fully focus on fixing Siemens Gamesa's operational problems.

"Do we know everything that is coming in the future, particularly around the supply chain constraints? No," Bruch said. "But ... my strong belief is that [a takeover] is now the most effective move, and it's necessary, really, to drive the solutions as fast as possible."

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