Tuesday, March 28

Takeover options on Siemens Gamesa attract Credit Suisse

The bad financial news published by Siemens Gamesa is causing an avalanche of optimistic reactions, at least with regard to the future price of its shares. The last entity to jump on the bandwagon of hope about the Spanish company has been Swiss credit, attracted by the takeover bid options for the Spanish group.

The Swiss investment bank announced on Monday the change in its neutral recommendation on the titles of Siemens Gamesa, which it replaces with an overweight suggestion, despite the downward adjustment it sets on the company’s target price.

OPA Sounds Drive Siemens Gamesa Recovery

The profit warning published by Siemens Gamesa on January 21 caused the company’s shares to drop as much as 14 percent immediately after the announcement.

Since then, however, the shares of the Spanish company have staged a recovery of about 12 percent that has raised its price from 16.2 euros to a momentary ceiling of 19.10 euros, an area that many analysts believe it will soon exceed.

In the battle between bulls and bears, the view prevails that the Spanish listed company will continue to grow on the stock market until it reaches a consensus price of 20.3 euros.

The reason given by several experts for this confidence is that, given the third downward revision of results in nine months by the Spanish renewable energy company, the option of an exclusion bid by its parent company, the German Siemens Energy, gains not only strength, but meaning.

It is a possibility that he considered JP Morgan before the profit warning from Siemens Gamesa, and that Deutsche Bank ratified last week, encrypting that the price of the bid would involve the payment of a 30 percent premium on the shares.

Swiss credit also contemplates this possibility, and it is one of the reasons put forward by the entity to improve its recommendation on the company.

Credit Suisse bets on the union of efforts between companies

Among the elements of analysis exposed in the recommendation of Swiss credit about Siemens Gamesa it is stated that “in the midst of the recent news about Siemens Energy considering the possibility of buying 33 percent of the free float of Gamesa, we continue to view full ownership as strategically attractive, with the potential for earnings per share growth of 1 to 8 percent for Siemens Energy“.

One of the reasons for the financial institution to positively assess this possibility of this merger between the subsidiary and the parent company is “the use of cross-selling between both divisions”, which would allow the maximum potential to be squeezed out of an entire energy portfolio that includes gas, wind, hydrogen, transmission, compression and storage “to facilitate the demand for energy transition”.

Swiss credit It also highlights that this merger would allow us to jointly develop hydrogen products to capture future market growth, as well as increase the exposure of Siemens Energy to green energy through wind production of Gamesa, and take advantage of additional cost synergy opportunities.

Finally, the report of Swiss credit notes “that at the time of the sale of Iberdrola’s stake in February 2020, the group Siemens mentioned a cost saving of 100 million euros, including in part the synergies derived from the rapprochement between Siemens Energy and Siemens Gamesa and in indirect costs.

The market adds bets in favor of this merger

With these reasons in mind, and taking into account other factors such as a projected margin recovery despite rising logistics costs, Swiss credit He now has a positive view of Siemens Gamesa shares, which he recalls have fallen 46 percent in the last 12 months.

The company’s problems, however, cause the target price assigned to the titles to go from 23.5 euros to 22.4, a recommendation that moves within the spectrum marked by Deutsche Bank, which calculated that the possible bid of Siemens Energy about Siemens Gamesa would be carried out under the payment of 21 euros per share.

The list of analysts who welcome this union of forces, therefore, increases, since from the US bank Citi it was also stated in a report that “such an agreement could allow a revaluation of Siemens Energy in the coming months, based on greater clarity and simplification of the group’s structure”.